Wall Street’s new bull market that started in mid-April, ending the coronavirus-induced short bear-market, has maintained its momentum in the past three months. After rallying for three months, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are likely to finish July on a positive note.
However, comparing these three large-cap-centric indexes, the Dow is significantly lagging its peers. Despite the blue-chip index’s weak performance so far this year, four out of its 30 components have skyrocketed year to date.
Uneven Performance of Dow So Far in 2020
The Dow ended 2029 at 28,538.44, providing 22.3% return annually. The blue-chip index started 2020 from where it ended last year and 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.
Dow’s northbound journey began on Mar 24 and is continuing barring occasional fluctuations. The index jumped an astonishing 51.4% during Mar 23 to Jun 8. However, after Jun 8, the index lost its momentum as the second wave of the coronavirus spiked a large part of the United States. During Jun 9 to Jul 22, the Dow lost 2.1%.
Dow Lags Peers
The Dow ended Jul 22 at 27,005.84, its first closing above 27,000 for the first time since Jun 9. The index is yet to appreciate 5.4% to become green year to date. On the other hand, the broad-market S&P 500 is in positive territory with 1.4% return while the tech-heavy Nasdaq Composite has already skyrocketed 19.3% year to date.
The Nasdaq Composite has posted 28 all-time highs so far this year with the latest recorded at 10,839.93 on Jul 21. The S&P 500 is still 3.5% below its all-time high recorded on Feb 19. Meanwhile, the Dow needs to climb 8.7% to reach its all-time high recorded on Feb 12.
The resurgence of coronavirus has taken a toll on the Dow. Several U.S. states were forced to close some parts of their economies that they reopened in less than a month. Several Dow companies are directly related with the reopening and stabilization of the U.S. economy.
Meanwhile, the technology sector has turned a new safe-haven owing to its inherent strength, coronavirus-led innovations and future growth potential, defying the spread of the deadly virus. That is why the tech-laden Nasdaq Composite is up year to date. Moreover, the six top-performing stocks of the S&P 500 are all tech behemoths.
4 Dow Stocks Flying High
Only nine stocks out of the 30-stock blue-chip index are currently in green year to date. Of the nine, only four stocks have witnessed a double-digit rally so far in 2020. Each of these stocks carries either a Zacks Rank #2 (Buy) 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of four stocks year to date.
Microsoft Corp. MSFT has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide. The company has doubled down on the cloud computing opportunity. It is one of the three largest providers of gaming hardware. Its Xbox console was one of the first gaming devices of its kind.
Microsoft also offers a hybrid cloud solution that enables the integration of existing IT infrastructure with the public cloud. The company is also pursuing growth in the SMB segment through partnerships with infrastructure providers such as GoDaddy.
The Zacks Rank #3 company has an expected earnings growth rate of 9.5% for the current fiscal (ending June 2021). The Zacks Consensus Estimate for current-year earnings has improved by 0.5% over the last 60 days. The stock has jumped 34.3% year to date.
Apple Inc.’s AAPL 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.
Apple is encouraging developers to use artificial intelligence 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 Zacks Rank #3 company has an expected earnings growth rate of 3.9% for the current year (ending September 2020). The Zacks Consensus Estimate for current-year earnings has improved by 0.2% over the last 30 days. The stock price has climbed 32.5% year to date.
The Home Depot Inc. HD is the world’s largest home improvement specialty retailer with over 2,200 retail stores across the globe, offering a diverse range of branded and proprietary home improvement items, building materials, lawn and garden products, and related services.
The company primarily serves home owners and professional renovators/remodelers, general contractors, handymen, property managers and building service contractors.
The Zacks Rank #2 company’s expected earnings growth rate for the current year is negative 1.6% (ending January 2021). However, it has expected earnings growth rate of 10.4% for next year. The Zacks Consensus Estimate for the current and next year has improved 1.8% and 0.9%, respectively, over the last 7 days. The stock has surged 21.5% year to date.
Walmart Inc. WMT 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.
Walmart has been gaining from its sturdy comparable store sales record, which in turn is driven by its constant expansion efforts and stellar e-commerce performance. The company is trying every means to evolve with the changing consumer environment to compete with brick-and-mortar rivals and e-commerce behemoths.
The Zacks Rank #3 company’s expected earnings growth rate for the current year is a break-even (ending January 2021). However, it has expected earnings growth rate of 9.7% for next year. The Zacks Consensus Estimate for next year has improved by 0.2% over the last 30 days. The stock has gained 11.7% year to date.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it’s predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce “the world’s first trillionaires,” but that should still leave plenty of money for regular investors who make the right trades early.
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