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Stimulus to Prevent Economic Calamity Buoys Wall Street: 5 Picks

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Stocks recently tumbled more than 20% and are now in the bear market. Meanwhile, investors are fretting over the coronavirus pandemic and its subsequently impact on corporate earnings and global economic growth. The pandemic will certainly mean prolonged lockdown in several nations, which might lead to defaults by not only big companies but also small business houses that grapple to survive a revenue slump.

But as investors try to make sense of the coronavirus-led business slowdown, the White House and Fed’s massive stimulus measures to help the economy deal with the crisis improved investors’ confidence, at least to some extent. And that’s certainly got reflected in the latest stock market movements. Most of the major U.S. indexes have started to gain modestly, recovering some of the recent losses.

U.S. Treasury Secretary Steven Mnuchin had said that the government is working on approving a $1-trillion relief plan that will directly benefit American consumers and especially small business houses. Further, the Trump administration is planning to allow Americans defer tax payments to $1 million for 90 days.

Such stimulus package will be the biggest since the 2008 financial crisis, and it will include a $50-billion relief for the struggling U.S. airline industry, which has taken a serious beating due to travel restrictions and cancellations.

In addition, the Fed has now declared a special lending program that will help the flow of credit to households and businesses. These loans will be backed by $10 billion from the U.S. Treasury. Mnuchin, in fact, said that “the economic disruption and uncertainty created by COVID-19 has created challenges for the commercial paper market, constraining access to short-term credit for American businesses. Thus, by providing short-term credit, the [lending program] will help American businesses manage their finances through this challenging period.”

The Fed, by the way, has already trimmed borrowing costs and pumped billions of dollars into the banking system to sustain the credit flow. Policy makers unanimously agreed to trim benchmark federal funds rate a full percentage point to a range of zero to 0.25%. Earlier this month, in a rare inter-meeting move, the Fed trimmed its benchmark interest rate by half a percentage point to a range of 1-1.25%.

But it’s not just the Fed. Investors also reacted positively to new measures from both the ECB and Bank of England, while Norway’s central bank slashed its primary interest rate by 75 basis points. The ECB unveiled a massive bond buying program which is intended to counter the serious threat to the Eurozone economy as investors raise doubts about Italy’s creditworthiness. In order to pump cash into the financial markets rattled by the pandemic, the ECB will buy nearly $820 billion in government and corporate bonds as well as other assets. Bank of England, in the meantime, announced that it will trim benchmark interest rate to 0.1% and will buy more government and corporate bonds.

5 Best Stocks to Buy on Stimulus Measures

As markets recovered some recent losses after investors hoped that the current government and central bank measures will shield the global economy against the coronavirus-induced recession, investing in some stocks that are fundamentally sound enough to rake in gains in the near term seems prudent. These stocks flaunt a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cornerstone Building Brands, Inc. (CNR - Free Report) designs, engineers, manufactures, and markets external building products. The Zacks Consensus Estimate for its current-year earnings has moved up 3.6% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 21.4% and 46.2%, respectively.

Amkor Technology, Inc. (AMKR - Free Report) provides outsourced semiconductor packaging and test services. The Zacks Consensus Estimate for its current-year earnings has moved up 25% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 550% and 78.6%, respectively.

Enova International, Inc. (ENVA - Free Report) provides online financial services. The Zacks Consensus Estimate for its current-year earnings has moved up 7.9% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 21.6% and 13.7%, respectively.

TRI Pointe Group, Inc. (TPH - Free Report) engages in the design, construction, and sale of single-family detached and attached homes. The Zacks Consensus Estimate for its current-year earnings has moved up 6.8% over the past 60 days. The company’s expected earnings growth rate for the next quarter and current year is 88.9% and 6.8%, respectively.

James River Group Holdings, Ltd. (JRVR - Free Report) provides specialty insurance and reinsurance services. The Zacks Consensus Estimate for its current-year earnings has moved 2.5% north over the past 60 days. The company’s expected earnings growth rate for the current year is 46.4%.

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