Wall Street's new bull market that started in mid-April, ending the coronavirus-induced short bear-market, has gathered pace since last week. On May 27, the Dow closed at 24,995.11, its highest closing since Mar 6. During the trading session, the 30-stock index touched 25,000 briefly for the first time in more than two and half months.
Dow's Impressive Rally Continues
The Dow recorded its all-time high of 29,568.57 on Feb 12. However, the index entered into the bear market on Mar 11 with the outbreak of the deadly coronavirus globally. The downward movement continued till Mar 23 as almost all countries, including the United States imposed partial or total lockdowns.
However, the blue-chip index's northbound journey began on Mar 24 and is continuing barring occasional fluctuations. The index jumped 37.2% during Mar 23 to May 27. Month to date, the index is up 2.67% and on pace for back-to-back monthly gains.
Reopening the Global Economy
Meanwhile, 43 states have decided to ease lockdown restrictions and open up their economies in some form by this month end including portions of the hard hit New York. Tech giants like Apple Inc. and Alphabet Inc. (GOOGL - Free Report) have decided to open stores systematically from this month. Data from booking platform OpenTable revealed that in some states, U.S. consumers are slowly returning to restaurants. The Wall Street Journal recently reported growing freight trucking activities.
Major European countries like Germany, Spain, Italy and the U.K. are gradually reopening businesses and educational institutions, organizing sports events and lifting travel restrictions. Emerging countries like India, Singapore, Australia and South Africa are in the process to reopening.
Development in COVID-19 Immunization
According to Fundstrat, at present, there are 10 vaccines in clinical evaluation and 114 in preclinical evaluation for the treatment of COVID-19. On May 18, Moderna Inc. (MRNA - Free Report) announced that all 45 patients administered with its coronavirus vaccine candidate in a Phase 1 clinical trial developed neutralizing antibodies.
On May 27, Novavax Inc. (NVAX - Free Report) said it started human trials of its vaccine candidate in Australia. Merck & Co. (MRK - Free Report) said that its portfolio will be enhanced by two potential vaccines and an experimental drug against the coronavirus very soon.
Partial Recovery of Crude Oil Prices
Crude oil prices have recovered to a large extent from Apr 20, when the WTI crude price finished in negative for the first time in history owing to coronavirus-induced global economic lockdowns. In the past month, this benchmark crude price has jumped nearly 170% while Brent crude, the global benchmark, has climbed nearly 54%.
In the past month, global crude oil production has plunged an estimated 13-15 million barrels per day (bpd). The OPEC and Russia led allies have cut production by around 9.7 million bpd while U.S. crude production has dropped by 1.5 million bpd. Global demand for crude oil is showing an uptick as more and more economies are reopening.
Our Top Picks
We have narrowed down our search to four Dow stocks that have popped in the past month. Each of our picks carries 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 the price performance of our four picks in the past month.
Apple Inc.'s (AAPL - Free Report) Services and Wearables businesses are expected to drive top-line growth in fiscal 2020 and beyond. Although Apple’s business primarily runs around its flagship iPhone, the Services portfolio has emerged as its new cash cow.
The company is encouraging developers to use artificial intelligence (AI) and machine learning in their apps. Apple’s focus on autonomous vehicles and augmented virtual reality technologies presents growth opportunity in the long haul.
The company has an expected earnings growth rate of 3.5% for the current year (ending September 2020). The Zacks Consensus Estimate for current-year earnings has improved by 1.2% over the last 30 days. The stock price has jumped 11.8% in the past month.
Exxon Mobil Corp.'s (XOM - Free Report) growth developments include the Stabroek Block, located off the coast of Guyana. In the block, the company estimates gross recoverable resource of more than 8 billion oil-equivalent barrels. It projects daily Guyana oil production volumes of more than 750,000 gross barrels by 2025. Management's track of capex discipline across the commodity price cycle makes it a relatively low-risk play.
Although the company has a negative expected earnings growth rate for the current year, it boasts strong growth of 134.7% for next year. The Zacks Consensus Estimate for current-year earnings has improved by 18.2% over the last 30 days. The stock price has rallied 4.5% in the past month.
Cisco System Inc. (CSCO - Free Report) is the largest player in the networking space. The company has strong presence in the router and switch market. It has also retained a leadership position in WLAN and Ethernet switching. Moreover, expansion into relatively under-penetrated markets is expected to drive growth.
The company has an expected earnings growth rate of 1.6% for the current year (ending July 2020). The Zacks Consensus Estimate for current-year earnings has improved by 3.3% over the last 30 days. The stock price has climbed 4.1% in the past month.
Chevron Corp.'s (CVX - Free Report) well economics in the Permian Basin, where it has substantial holdings of 2.2 million net acres, continues to show improvement. The company has been able to achieve a 40% reduction in its development and production costs since 2015. Thanks to its successful cost control initiatives, Chevron has lowered its break-even price for oil to an industry-leading $51 per barrel.
Although the company has a negative expected earnings growth rate for the current year, it boasts strong growth of 397.1% for next year. The Zacks Consensus Estimate for current-year earnings has improved by 33.3% over the last 30 days. The stock price has surged 4% in the past month.
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