3 Things to Watch in the Stock Market This Week

By Markets Fool.com

Stocks ticked up last week as volatility returned to the market. The Dow Jones Industrial Average(DJINDICES: ^DJI)and the S&P 500 (SNPINDEX: ^GSPC)logged three straight days of swings of 1% or more after a quiet period that lasted for nearly three months. Overall, the indexes are up by 4% to 5% year-to-date.

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In the week ahead, economic headlines will be dominated by what the Federal Reserve decides to do -- or not do -- during its monetary policy meeting. The central bank could announce its second interest rate hike in a decade on Wednesday afternoon, or officials might say that conditions aren't quite ideal for that move. Whatever the decision, given the uncertainty around the Fed's thinking, increased volatility is likely both before and after the announcement.

Meanwhile, FedEx (NYSE: FDX), CarMax (NYSE: KMX) and Finish Line (NASDAQ: FINL) stocks could all see big swings this week tied to the companies' quarterly earnings reports.

FedEx: holiday forecast

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FedEx posts quarterly results after the market closes on Tuesday, and investors have a few good indications about what to expect from the package delivery giant thanks to the late July report from rival UPS. There is likely to be growth in premium services tied to a surging e-commerce industry. FedEx could also see strength in its international markets and perhaps some weakness in the freight division.

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However, there is an unusual amount of uncertainty around these results since they will include significant closing and financing costs from the TNT Express acquisition.

That purchase should help FedEx post a 13% sales improvement, according to consensus estimates, compared to its flat results over the last fiscal year. Yet investors will be paying close attention to the company's profitability. Operating margin rose by a full percentage point over the last year to reach 10% of sales. We'll find out on Tuesday whether management thinks about current global growth trends, its holiday sales outlook, and the impact of its biggest acquisition yet.

CarMax: customer traffic

Used-car specialist CarMax will announce its results before the market opens on Wednesday morning in what will be Bill Nash's first quarterly report as CEO. Nash takes the reins at a tricky time for the company given that customer traffic trends have been negative for three consecutive quarters. That shortfall helped push comparable-store sales to near-zero growth last quarter.

CarMax succeeded in converting more of its visitors into car buyers, though, and a second boost in its conversion rate could juice sales results for this period. Gross profit margin will be another key metric to watch. That figure ticked up to 14% of sales as the markup held steady on used vehicles last quarter, slipped on wholesale automobiles, and jumped on the financing side of the business thanks to a sharp decline in third-party loan volume.

Finally, investors will get important updates on expansion plans. CarMax entered two new markets recently with stores added in El Paso, Texas, and Bristol, Tennessee. Executives aim to aggressively extend coverage given that a large chunk of car shoppers still aren't served by its car showrooms. It would take a sharp drop in comparable-store sales to knock the company off of that planned expansion pace.

Finish Line: growth forecast

Finish Line shares are up heading into this week's report after investors found plenty to like in its last quarterly showing. Comparable-store sales and profitability both held up despite what CEO Sam Sato called a "challenging retail environment". Executives at the time reaffirmed the full-year outlook that calls for comps of about 4% and profits weighing in at $1.53 per share.

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That forecast implies accelerating growth as we head into the critical holiday shopping season, which may need to be dialed back if Sato and his team notice lower customer traffic at its mall-based locations. On the other hand, if things stay on track, then the retailer is likely to post its strongest growth in over three years, and the stock might even add to its year-to-date 27% gains.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of and recommends CarMax and FedEx. The Motley Fool recommends United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.