Checking Up on the Reopening

Get ready for a status check on the reopening. A confluence of telling earnings reports and economic data makes tomorrow another important read on the economic rebound. 

A slew of first-quarter results could indicate how consumers are prioritizing their spending, as Covid cases drop and vaccine rates rise. 

Home electronics and appliance retailer Best Buy is forecast to report a 22% jump in sales, to $10.4 billion, with earnings more than doubling, to $1.40 a share. Best Buy is worth watching for commentary about consumer demand, as well as its exposure to ongoing shortages ranging from computer chips to refrigerators. 

While the retailer should broadly benefit from the reopening, the company could find itself on the wrong side of certain trends. "We see discretionary spending shifting back to travel and entertainment as the economy 'opens' and could be more detrimental to consumer electronics than home retail due to the housing market tailwinds," Wedbush analyst Seth Basham wrote late last month in downgrading the stock to Neutral from Outperform. 

Best Buy shares are up 17% over the last three months, outperforming the broad market. 

PC and printer maker HP Inc. will have more to say on how consumer habits are changing with respect to electronics. The company's stock has surged, up 89% over the last year, as Americans adjusted to at-home work and school. Analysts forecast sales growth of 20% in HP's latest quarter, with growth moderating and eventually slipping in the quarters to come. Any contrary outlook from HP executives could be a significant piece of news. HP rival Dell Technologies also reports after hours.

The day will bring a more direct check on the consumer and rising costs, with Dollar Tree and Dollar General also scheduled to report. The dollar store companies' sales accelerated during the pandemic, boosted by stimulus checks, so they'll face tougher comparisons in the quarters to come. Keep an eye on inflation-related commentary from the executive teams, particularly around labor costs. Ulta Beauty, Costco, and Gap report tomorrow, as well. 

Investors will also get a good read on the cloud and the ongoing digital transformation, with Salesforce, Autodesk, Box all scheduled to report. Tech investors have spent months trying to handicap whether the cloud opportunity could recede as offices reopen.

One wild card in the reopening is whether consumers will begin to reschedule semi-elective health procedures. Sales of medical-device maker Medtronic tumbled during the pandemic. "Almost all of our businesses were affected by the decline in procedure volumes this quarter," the company told investors a year ago. "Healthcare systems diverted their attention and resources to fighting Covid-19."

The company is likely to deliver a different message tomorrow. Analysts forecast sales jumped 36% in the latest quarter. 

The latest report on durable goods, due tomorrow morning, will offer a check on demand for industrial goods, the types of machines and equipment needed to eventually reduce shortages across the economy. Economists expect growth of 0.75% from March. 

There's also news from the housing sector. At 10 a.m., the National Association of Realtors will release data on pending home sales in April. Pending home sales tracks contracts for sales on single family homes, co-ops, and condos. It's a leading indicator of home sales. In March, contract signings were up 1.9% from the prior month. Economists expect 0.82% growth in April. Those figures continue to be dragged down by relatively low inventory of homes on the market. A surprise could suggest that rising home prices are beginning to loosen the supply. Home prices were up 13% nationally in March, the largest increase since December 2005. 

Stay tuned. By tomorrow night, the reopening could have a new look.