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Wall Street Stories That Hit Headlines in 2020

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This has turned out to be a banner year with historic twists and turns. After a solid rally in February, the pandemic wreaked havoc on the economy and sent the markets into the bear territory in late March in the fastest-ever move. Then, Wall Street made an astounding rebound with the major indices soaring to historic highs on super-easy monetary policies coupled with COVID-19 vaccine optimism. A potentially divided Congress added to the strength.

Below we discuss some of the events that dominated the headlines in 2020 and influenced the market in a big way:

Super-Easy Policies

The Fed has pledged to hold rates near zero and will continue the asset purchase program at the current rate until “substantial further progress” has been made toward reaching maximum employment and healthy inflation.

Additionally, the latest fresh stimulus will support the stock bulls. President Trump signed the new coronavirus relief package of $900 billion, which includes a round of $600 direct payments, extends two federal unemployment programs, funding for the Paycheck Protection Program, and a $300 per week unemployment compensation supplement.

The combination of cheap money policies as well as further stimulus will continue to drive the stocks higher. In particular, the scenario seems more profitable for small-cap stocks as it pushes up economic activities and results in higher spending, thus boosting domestically focused companies. Liquidity Services Inc. LQDT, having a Zacks Rank #2 (Buy) and VGM Score of A, has surged more than 173% this year and is expected to maintain its bullish trend heading into 2021. The stock has an impressive estimated earnings growth of 183.3% for the fiscal year (ending September 2021). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Digitization

The pandemic has accelerated the digital shift, thus driving the e-commerce boom. As a large number of consumers avoid direct contact and stay at home, the demand for cloud computing, gaming, e-sports, streaming services as well as online shopping has increased.

Given this, investors could bet on the booming trend with the top-ranked stock in this space. Wayfair Inc. W has a Zacks Rank #2 and VGM Score of A. With a market cap of $23.7 billion, it is one of the world's leading online sellers of home goods products, consisting of furniture and home décor. The stock has an estimated earnings growth rate of 159% for this year.

COVID-19 Vaccination

Coronavirus immunizations have started in America with Pfizer (PFE - Free Report) and Moderna (MRNA - Free Report) shots and more vaccines on the way. Other firms like Sanofi (SNY - Free Report) , GlaxoSmithKline (GSK - Free Report) , Merck (MRK - Free Report) and Johnson & Johnson (JNJ - Free Report) are also in the process of developing the vaccine. A vaccine will end the pandemic crisis and set the stage for a speedy recovery, thereby boosting demand for several types of products and services in the economy.

While the rally seems broad-based, the cyclical sectors are expected to benefit the most, as these are closely tied to economic activities and outperform when economic growth improves. Some of the top-ranked stocks from these spaces include Nexstar Media Group Inc NXST, Deere & Company (DE - Free Report) and BHP Billiton PLC BBL. These stocks have a Zacks Rank #1 or 2, suggesting their outperformance in the months ahead. Further, these stocks are expected to generate solid earnings growth in the current fiscal year (NXST – 236.2%, DE – 48.4%, and BBL – 38%).

Stock Splits

Two of the hottest stocks — Tesla TSLA and Apple (AAPL - Free Report) — split their shares in the ratio of 5-for-1 and 4-for-1, respectively, at the end of August. The move made these stocks more accessible to investors and employees, and attracts individual investors, who make small trades.

This is because a stock split creates more shares of a company without changing the underlying dollar value of any single investor's holdings. By increasing the number of shares available, the company can attract new investors who might otherwise not be able to afford a single share at a high price.

Tesla Joins S&P 500

Tesla Motors joined the S&P 500 Index on Dec 21. The stock replaced Apartment Investment and Management Co. and represents about 1.6% of the index. It is the sixth heaviest stock trailing both of Alphabet's (GOOGL) share classes, Apple, Amazon (AMZN), Microsoft (MSFT) and Facebook (FB).

The electric maker has seen a meteoric rise of 696% this year. It has an estimated earnings growth rate of more than 1000% for this year. Tesla has a Zacks Rank #1 and Growth Score of A.

Dow Shake-Up

The Dow Jones Industrial Average has undergone major changes effective Aug 31 before market open. Three stocks, namely Exxon Mobil (XOM - Free Report) , Pfizer (PFE - Free Report) and Raytheon , in the blue-chip index were replaced by salesforce.com Inc. (CRM - Free Report) , Amgen Inc. AMGN and Honeywell International (HON - Free Report) . This is the first reshuffle since 2013.

salesforce.com is the first cloud-software entry into the Dow Jones Industrial Average. The inclusion of Amgen indicates the rise of biotech as the race for COVID-19 vaccine continues while Honeywell makes a comeback after 10 years.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

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