Wall Street’s fabulous bull-run in 2019 halted on Jan 3 after the U.S. airstrikes in Iran that killed its military general Qasem Soleimani. On that day, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — retreated 0.8%, 0.7% and 0.8%, respectively, reflecting their worst trading day in a month.
However, Wall Street recovered the next trading day on Jan 6. Initially, the indexes opened with sharp losses. At their lowest points on Monday, the Dow was down 0.9%, the S&P 500 0.6% and the Nasdaq Composite 0.8%. However, major indexes finished Jan 6 trading with a gain of 0.2%, 0.4% and 0.6%, respectively, marking their best single-day turnaround since Oct 3, 2019.
Upcoming Phase-One Trade Deal to Usher Market Recovery
On Jan 6, The South China Morning Post reported that Chinese officials are set to arrive in Washington on Jan 13 for a four-day meeting with U.S. top-level delegates in order to sign an interim trade pact known as the phase-one trade deal. Last week, President Donald Trump said that he will sign the preliminary trade deal on Jan 15.
The deal is expected to at least prevent further escalation of tariff war between the two largest trading countries of the world. An interim trade deal is likely to restore U.S. business confidence significantly which in turn will lead the sagging manufacturing sector toward a rebound.
Dow Firmly in the Green Despite Fluctuations
Several economists and financial researchers have feared that geopolitical conflict in Iran has escalated oil prices to their highest level in four years. Further, escalation of oil prices may generate recessionary tendencies in several emerging countries, which will affect global economic recovery.
Against this backdrop, the blue-chip index has surged, defying all odds. The Dow rallied 22.3% in 2019. This was an excellent performance after a disappointing 2018 when the blue-chip index had lost nearly 6%. Continuing this trend, in the first three trading days of this year, the index is up 0.6%. In 2019, the Dow crossed the technically vital 28,000 level for the first time and is currently firmly settled above this physiological barrier.
On Jan 6, the Dow closed at 28,703.38, well above its 50-day and 200-day moving averages of 27,878.89 and 26,755.34, respectively. In financial literature, the 50-day moving average line is generally recognized as the short-term trend setter, while the 200-day moving average is considered as the long-term trend setter.
It is widely recognized in the technical analysis space that whenever the 50-day moving average line surges ahead of the 200-day moving average line, a long-term uptrend for the index becomes a strong possibility.
Our Top Picks
At this stage, it will be prudent to invest in blue-chip stocks with a favorable Zacks Rank and strong dividend yield, which will act as a regular income stream to investors. Therefore, these stocks will likely benefit from both market rally and attractive dividend.
We have narrowed down our search to five such stocks, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows price performance of our five picks in the past year.
Apple Inc. (AAPL - Free Report) designs, manufactures and sells iPhone, iPad, iPod, Apple TV, Mac personal computers, Apple Watch, HomePod and AirPods. These devices are powered by software applications including iOS, macOS, watchOS and tvOS operating systems. Apple’s non-iPhone businesses, particularly Services and Wearables, are expected to drive top-line growth in fiscal 2020 and beyond.
The company has an expected earnings growth rate of 10.2% for the current year (ending September 2020). The Zacks Consensus Estimate for the current year has improved 0.3% over the last 60 days. The stock has rallied 98.9% in the past year and has a dividend yield of 1.04%.
NIKE Inc. (NKE - Free Report) is engaged in the business of designing, developing and marketing of athletic footwear, apparel, equipment and accessories, and services for men, women and children worldwide. Despite the volatile macroeconomic and geopolitical environment, NIKE expects to continue investing in key capabilities to aid digital transformation and deliver robust growth in fiscal 2020 and beyond.
The company has an expected earnings growth rate of 20.9% for the current year (ending May 2020). The Zacks Consensus Estimate for the current year has improved 1.3% over the last 60 days. The stock has climbed 32.7% in the past year and has a dividend yield of 1%.
The Procter & Gamble Co. (PG - Free Report) provides branded consumer packaged goods to consumers in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. It operates in five segments: Beauty; Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care.
The company has an expected earnings growth rate of 9.3% for the current year (ending June 2020). The Zacks Consensus Estimate for the current year has improved 0.2% over the last 60 days. The stock has jumped 32.7% in the past year and has a dividend yield of 2.43%.
Walmart Inc. (WMT - Free Report) operates retail stores, restaurants, discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, apparel stores, Sam’s Clubs, and NeighborhoodMarkets, as well as the websites, walmart.com and samsclub.com.
The company has an expected earnings growth rate of 4.4% for the current year (ending January 2021). The Zacks Consensus Estimate for the current year has improved 1.4% over the last 60 days. The stock has surged 23.6% in the past year and has a dividend yield of 1.80%.
American Express Co. (AXP - Free Report) provides charge and credit payment card products and travel-related services to consumers and businesses worldwide. It operates through three segments: Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services.
The company has an expected earnings growth rate of 10.8% for the current year (ending December 2020). The Zacks Consensus Estimate for the current year has improved 0.1% over the last 60 days. The stock has surged 25.7% in the past year and has a dividend yield of 1.38%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>