By Caroline Valetkevitch

NEW YORK, (Reuters) – Recent gains in U.S. retailer stocks could come to an end as the sector’s top firms report quarterly results. Investors are looking for clues on how they managed their supply chain issues.

Retail companies have had a strong run so far this month, with the retailing exchange-traded fund up about 9% compared with a roughly 2% gain for the S&P 500.

It has been a good sign that the world is beginning to recover from the pandemic. The new COVID-19 antiviral pill will be able to help keep the spread of new infections under control.

The third-quarter earnings season is in the final stretch, with less than 10% of the companies in the S&P 500 yet to report.

Retailers will make up a large portion of these results, which are due to be released by Walmart (NYSE:) Inc. early Tuesday. Home Depot (NYSE:) while Target The week will end with Corp (NYSE;), Macy’s, (NYSE.:) or Kohl’s (NYSE.:)

Also, Tuesday is the due date for U.S. retail sales figures for October.

However, retailers’ ability to sustain their recent gains may depend on how they manage the global supply chain crisis. This has added concerns regarding the holiday season.

Michael James from Wedbush Securities, Los Angeles managing director of equity trading, said that “traditionally, you want be long retail heading into Black Friday”. This refers to the day immediately following Thanksgiving in the U.S., and officially marks the start to holiday shopping season.

He added, “Thus said there are significant supply chains unknowns.” Who managed to succeed despite the challenges in their supply chains? This is the most important question each company will have to answer.

James explained that while reports should be analyzed individually, investors want greater guidance from companies experiencing recent strong gains.

He stated that any hint of disappointment was not being handled well.

Investors have reason to feel optimistic after some of the results. Stocks Wearing Under Armour Inc (NYSE 🙂 rose earlier in the month following an increase in its revenue forecast and profits.

Of all S&P 500 companies who have reported, about 80% have beaten analysts’ expectations, and the forecast for year-on-year third quarter earnings growth is now at 41.5%, up from the 29.4% seen at the beginning of October, according to IBES data from Refinitiv.

Based on data from Refinitiv, the growth in consumer discretionary earnings, which include many retailers, was 14.5%, as opposed to 8% at October’s start.

Refinitiv’s consumer research director Jharonne Martis reported Monday that online sales will be closely monitored in order to assess if there is a slowdown in the shift to online purchases.

She said that the latest digital growth figures for third quarter suggest that business volumes are “holding up”.

When investors analyze results closely, another important issue will be expenses.

Jake Dollarhide is the chief executive officer at Longbow Asset Management.

“All these companies want to create cloud platforms and their delivery services, automations, robots… So even though sales are record highs, expenses must be at record lows.”