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5 Finance Picks Amid Coronavirus-Induced Weak Consumer Sentiment

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As the latest blow of the novel coronavirus outbreak to the economy, the optimism of the U.S. consumer has witnessed a major downfall. On Friday, Dow Jones Industrial Average and S&P 500 recorded a fall of 4.1% and 3.4%, respectively.

Per the final reading released by The University of Michigan, consumer sentiment in the United States declined to 89.1 in March, making it the fourth-largest monthly decline in the last 50 years. Notably, the decline of 11.9 points fell short of 12.7 decrease registered at the time of the 2008 financial crisis.

Fear over one’s health and the economic impact of the pandemic are the key reasons behind the decline in the index.

 

Further, rapid rise in number of people infected with Covid-19 and count having already surpassed 100,000 mark, makes United States the new epicenter of the pandemic. Thus, this is likely to make consumers more apprehensive of the economic conditions and further push sentiments to record-low levels.

Richard Curtin, the director of the University of Michigan’s Surveys of Consumers, stated, “The extent of declines in consumer spending in the months ahead will depend on the success in curtailing the spread of the virus and how quickly households receive funds to relieve their financial hardships.”

How Are Weak Consumer Sentiments & Finance Sector Connected?

Consumer spending accounts for about 70% of the U.S. economic activity. Thus, weak consumer sentiment might further impact the finance companies, which are already facing troubles, owing to the curtailment of business activities and lower interest rates.

A fall in consumer spending is likely to result in lower demand for loans, insurance and other products provided by finance companies, thereby straining their top lines, which is already set to be impacted by a decline in interest rates to near-zero.

Following the release of the measure, other firms would also cutback on their business with the finance companies to keep themselves liquid enough to face challenges ahead.

Despite these near-term challenges, being faced by the finance sector, there are several companies that display strong fundamentals.

Selecting the Winning Finance Stocks

At times of such volatile markets, investors should zero in on stocks, with robust long-term growth capabilities.

We have taken the help of the Zacks Stock Screener to shortlist stocks with a market capitalization of more than $5 billion. Further, the stocks have an earnings growth projection of more than 10% over the next three-five years. Moreover, the stocks currently carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Moody's Corp. MCO, based in New York, has a market cap of $41.2 billion and is a leading provider of credit ratings, research, and data & analytical tools. The company currently carries a Zacks Rank #2 at present. Further, the stock has an earnings growth projection of 10% for three to five years.

Headquartered in San Francisco, CA, Equinix, Inc. EQIX has a market cap of $48.1 million. It operates as a provider of network-neutral data centers and Internet exchange services. Earnings of this Zacks Rank #2 stock are projected to grow 17.6% in the long term.

Credit Acceptance Corp. CACC is a credit services company, with a market cap of $5.2 billion and a Zacks Rank #2. The Southfield, MI-based firm’s earnings are projected to grow 11% in three to five years.

Headquartered in New York, Tradeweb Markets Inc. TW has a market cap of $9.5 billion. It operates as an investment bank. Earnings of this Zacks Rank #1 company are projected to grow 14.3% in the long term.

Intercontinental Exchange Inc. ICE, based in Atlanta, GA, has a market cap of $45 billion and operates regulated exchanges, clearing houses, and listings venues. The company presently carries a Zacks Rank of 2. Further, the stock has an earnings growth projection of 10% for three to five years.

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