For Immediate Release
Chicago, IL – September 22, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Apple Inc. (AAPL - Free Report) , salesforce.com inc. (CRM - Free Report) , Walmart Inc. (WMT - Free Report) , Lowe's Companies Inc. (LOW - Free Report) and Costco Wholesale Corp. (COST - Free Report) .
Here are highlights from Monday’s Analyst Blog:
4 Reasons for Wall Street to Stay Bullish Amid Recent Turmoil
Wall Street's more than five-month-long bull run has suffered a severe setback in September. Month to date, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are down 2.7%, 5.2% and 8.3%, respectively. Notably, these three indexes have ended in negative territory for the first three weeks of September. This has happened for the first time in 2020.
Stock markets recent turmoil has prompted a section of economists and financial experts to warn of more downslide going forward. They cited uncertainty regarding more fiscal stimulus, conflicting news on the availability of a coronavirus vaccine, mounting tech war between the United States and China and the upcoming U.S. presidential election as the sources of volatility. In contrast, we will discuss four reasons for Wall Street to remain north bound, overcoming the recent mayhem.
Economy is Growing Without Fresh Stimulus
Several economists have pointed out that the pace in which the U.S. economy recovered during the May - July period dwindled in August. Slow growth in job data, retail sales data and housing market data are all examples. However, the vital point here is that the economy is still growing, albeit at a slow pace, despite the lack of the second trench of fiscal stimulus when there is persistence of coronavirus-led woes.
Notably, the first round of fiscal stimulus which included $600 per week per individual of unemployment benefit and a massive paycheck protection aid to small businesses, ended in July. Despite this, retail sales climbed 2.6% year over year in August to $537.5 billion, which put the metric back on its pre-pandemic trajectory.
Moreover, not all industries lost momentum. U.S. manufacturing, which suffered a huge blow last year thanks to the trade tussle with China, has expanded in the last three months. Vehicle sales remained robust for the last three months and the preliminary data for consumer sentiment for September by the Michigan University increased by 4.8 points from last month.
Fed's Ultra-Dovish Monetary Stance
On Sep 16, in his lecture after the conclusion of the 2-day FOMC meeting, Fed Chairman Jerome Powell reiterated that the benchmark interest rate will stay zero or near zero at least up to 2023. The central bank will pursue its ultra-dovish monetary stance until the labor market returns to the “maximum employment” level and inflation reaches the Fed's target rate of 2% or moderately exceeds 2% for some time.
The Fed will also pursue its existing $120 billion monthly purchase of assets in the form of U.S. Treasury and mortgage bonds until the economy returns to normalcy or the pre-pandemic level.
The Fed's ultra-dovish monetary stance is a long-term positive for the stock market. A low-interest rate will reduce the cost of capital for businesses and consumers have a lesser propensity to save due to a low deposit rate.
Therefore, higher spending by businesses and consumers is likely to boost the overall economy and raise stock prices. Moreover, a low discount rate will increase the net present value of the investment in equities.
IPO and M&A Activities Flourish
Last week was the busiest for the U.S. initial public offering (IPO) market witnessed the busiest week last week since May 2019. Notably, 12 IPOs raised around $7 billion from the market.
These companies are looking to take advantage of the astonishing recovery of the U.S. capital market, defying coronavirus-induced devastations. A massive surge in IPO is indicating ample investor appetite for new stocks and growing confidence for risky assets like equities.
Globally, the merger and acquisition activities have heightened in September. Per Bloomberg, around $146 billion of M&A deals have been signed in September, up 51% year over year.
If this trend continues, September may become the best deal-making month since November 2019. The majority of the acquirers are large U.S. businesses. An impressive performance of Wall Street and stable fundamentals of the U.S. economy are the major drivers of strong M&A deals.
Future Looks Promising
In its latest projection on Sep 17, the Atlanta Fed estimated 32% growth for third-quarter U.S. GDP after it plunged 31.7% in the second quarter. On Sep 11, Goldman Sachs predicted a 35% growth of the U.S. GDP for the third quarter. Furthermore, projections for U.S. corporate earnings for third-quarter and full-year 2020 are rising since early July, indicating growing corporate profits.
The earnings trend is likely to improve going forward as large parts of the U.S. economy have started coming out of the pandemic-driven lockdown. After a resurgence of coronavirus infections, it seems that new COVID-19 cases have stabilized in the United States.
The reopening of the economy will limit the stock market's downside potential irrespective of the fact that recent fluctuations may persist for a few more days. Congressional sanction of a new fiscal stimulus will further boost market participant's confidence.
How to Invest
At this stage, it will be prudent to invest in large-cap (market capital > $100 billion) stocks with a favorable Zacks Rank that have suffered a sharp decline in September. These companies have well-established businesses, robust liquidity and brand names along with strong long-term (3-5 year) growth potential. Currently these stocks are available at a lucrative discount.
Major stocks that fall in this category include Apple Inc., salesforce.com inc., Walmart Inc., Lowe's Companies Inc. and Costco Wholesale Corp. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan. The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
Click Here, See It Free >>
Join us on Facbook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.