After a fabulous April, Wall Street is on track to close this month in positive territory defying the well-known financial-world adage "Sell in May and go away." On May 27, the Dow and the S&P 500 ended above 25,000 and 3,000, respectively, for the first time in more than two and half months.
Gradual reopening of the U.S. and global economy, recently released better than-expected economic data and an unprecedented stimulus package injected by United States and other major economies are fueling the new bull market.
Wall Street Rallying Amid Coronavirus Concerns
The coronavirus-induced concerns are persisting and a vaccine or a proper line of treatment is yet to be developed. Despite this, Wall Street bulls are raging forward since Mar 23. On May 27, the S&P 500 closed above 3,000 for the first time since Mar 5 and the Dow ended above 25,000 for the first time since Mar 10. Moreover, the Nasdaq Composite posted its biggest intraday percentage comeback since Feb 28.
So far, the Dow, the S&P 500 and the Nasdaq Composite have rallied 40.3%, 38.5% and 41.9%, respectively, since Mar 23. Month to date, these three indexes are up 4.9%, 4.3% and 5.9%, respectively. Meanwhile, the Nasdaq Composite is already in green year to date with a gain of 4.4%. However, the S&P 500 and the Dow are down 6% and 10.5%, respectively, year to date.
Positive Economic Data
The Conference Board reported that U.S. consumer confidence came in at 86.6 in May from 85.7 in April. This was unexpected as the street consensus was only 82.3 for this month. Notably, the Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – improved from 94.3 in April to 96.9 in May.
According to the U.S. Census, new home sales rose 1% in April compared with March. Sales of new single-family homes increased by 623,000 last month, beating the consensus estimate of 497,000. The National Association of Home Builders reported that building sentiment surged in May after falling sharply in April.
Additionally, the Mortgage Bankers Association’s seasonally adjusted index revealed that mortgage applications to purchase a home climbed 9% last week, reflecting the sixth straight week of gains as well as a recovery of 54% since early April.
Reopening the Global Economy
All 50 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. AAPL and Alphabet Inc. GOOGL 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. This will benefit the U.S. travel industry.
Our Top Picks
At this stage, it would be prudent to invest in stocks with a favorable Zacks Rank, strong growth potential and robust earnings estimate revision. We have narrowed down our search to five stocks with a Growth Score of A. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Chegg Inc. CHGG operates a direct-to-student learning platform from high school to college with tools designed to help them pass their class and save money on required material. The company has an expected earnings growth rate of 33% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 15.2% over the last 30 days. The stock price has jumped 45.1% in the past month.
BJ's Wholesale Club Holdings Inc. BJ is an operator of membership warehouse clubs primarily in East United States. It operates clubs and BJ's Gas locations in several states. The company has an expected earnings growth rate of 28.8% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 8.7% over the last 7 days. The stock price has climbed 30.9% in the past month.
Atlas Air Worldwide Holdings Inc. AAWW provides outsourced aircraft and aviation operating services. It operates through three segments: ACMI, Charter and Dry Leasing. The company has an expected earnings growth rate of 61.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 27.1% over the last 30 days. The stock price has soared 24.6% in the past month.
Sprouts Farmers Market Inc. SFM is a healthy grocery store that provides fresh, natural and organic food products in the United States. It has a unique model that features fresh produce at the center of the store, an expansive bulk food section and a vitamin department focused on overall wellness. The company has an expected earnings growth rate of 29.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 18.2% over the last 30 days. The stock price has surged 16.1% in the past month.
Quidel Corp. QDEL develops, manufactures, and markets diagnostic testing solutions for applications primarily in infectious diseases, cardiology and gastrointestinal diseases worldwide. The company has an expected earnings growth rate of 131% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 124.8% over the last 30 days. The stock price has gained 14% in the past month.
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Apple Inc. (AAPL) : Free Stock Analysis Report
BJs Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report
Quidel Corporation (QDEL) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Chegg, Inc. (CHGG) : Free Stock Analysis Report
Atlas Air Worldwide Holdings (AAWW) : Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
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