Wall Street's bull run has accelerated in April on the Biden administration's $1.9 trillion fiscal stimulus that was injected in February. Moreover, the nationwide deployment of COVID-19 vaccines on a priority basis and a faster-than-expected reopening of the economy have strengthened the recovery process.
On Apr 15, a series of strong economic data have elevated the Dow and the S&P 500 to record-high levels. The blue-chip index closed at 34,035.99, its first closing above the technical barrier of 34,000. In intraday trading, the 30-stock index posted a fresh all-time high of 34,068.73.
The benchmark S&P 500 recorded a new closing high of 4,170.42. In intraday session, the broad-market index registered a fresh all-time high of 4,173.49. Meanwhile, the Nasdaq Composite closed at 14,038.76, its first closing above 14,000 since Feb 16.
Strong Economic Data
Retail sales in March jumped 9.8%, marking the biggest monthly gain since May 2020 in contrast with a revised decline of 2.7% in February. The consensus estimate was 5.9%.
The core (excluding auto sales) climbed 8.4% compared with a revised decline of 2.5% in February and handily beating the consensus estimate of 5.1%. This impressive performance was the result of a $1,400 paycheck for consumers as part of the Biden administration's coronavirus-aid package.
New jobless claims dropped noticeably to 576,000 for the week ended Apr 10 from the upwardly revised 769,000 in the previous week. The consensus estimate was 702,000.
In March, the economy added 916,000 jobs and unemployment declined to 6%. Higher spending by consumers augmented business activities. Moreover, continuing government support to small businesses has resulted in more job creations.
Industrial production rose 1.4% in March compared with a revised decline of 2.6% in February. Capacity utilization increased to 74.4% in March against the downwardly revised 73.4% in February.
Finally, on Apr 15, despite strong economic data, the yield on the benchmark 10-Yeafr U.S. Treasury slid to a one-month low of 1.53% before closing at 1.57%. Notably, the yield soared from a mere 0.91% at the end of 2020 to 1.78% in late March, resulting in a sharp decline of high-growth oriented technology stocks.
Robust Early Trends for Q1 Earnings
The first-quarter 2021 earnings season has started with much vigor as most of the major banks have outperformed expectations. As of Apr 14, just 26 S&P 500 companies reported results. Total earnings of these companies are up 118.5% year over year on 9.4% higher revenues, with 80.8% beating EPS estimates and 84.6% beating revenue estimates.
For the first quarter as a whole, total earnings of the S&P 500 companies are expected to be up 24.1% from the same period last year on 6.0% higher revenues. (Read More: A Positive Start to Q1 Earnings Season)
High Expectations for 2021 GDP Growth
According to several published reports, the U.S. economy is likely to grow by 6.5-7% in 2021, its highest rate in 33 years. On Apr 15, the Atlanta Fed's GDPNow tracker estimated that the U.S. GDP in the first quarter of 2021 will jump 8.3%.
Our Top Picks
We have narrowed down our search to five U.S. corporate bigwigs (market capital > 50 billion) as these companies have a well-established business model and powerful brand value. These stocks have a strong upside potential for 2021 and witnessed robust earnings estimate revisions in the last 7 to 30 days.
Moreover, all these stocks have strong long-term (3-5) growth prospects and have provided more than 20% returns year to date. Also, these companies are regular dividend payers providing an important income stream during a market downturn. Finally, 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 year to date.
Exxon Mobil Corp. XOM has an expected earnings growth rate of more than 100% for the current year. The company has a long-term growth rate of 9.5%. The Zacks Consensus Estimate for the current year has improved 4.8% over the last 7 days. The stock price of the company has climbed 38.2% year to date, The company has a current dividend yield of 6.3%.
Deere & Co. DE has an expected earnings growth rate of 83.7% for the current year (ending October 2021). The company has a long-term growth rate of 19.2% and a current dividend yield of 1%. The Zacks Consensus Estimate for the current year has improved 0.6% over the last 7 days. The stock price of the company has jumped 42% year to date.
The Goldman Sachs Group Inc. GS has an expected earnings growth rate of 34.9% for the current year. The company has a long-term growth rate of 22.7%. The Zacks Consensus Estimate for the current year has improved 1.6% over the last 7 days. The stock price of the company has appreciated 28.4% year to date. The company has a current dividend yield of 1.5%.
Chevron Corp. CVX has an expected earnings growth rate of more than 100% for the current year. The company has a long-term growth rate of 5% and a current dividend yield of 5.1%. The Zacks Consensus Estimate for its current-year earnings has improved 3.8% over the last 7 days. The stock price of the company has advanced 22.5% year to date.
Micron Technology Inc. MU has an expected earnings growth rate of 93.6% for the current year (ending August 2021). The company has a long-term growth rate of 15.7%. The Zacks Consensus Estimate for the current year has improved 18.9% over the last 30 days. The stock price of the company has surged 20.1% year to date.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Micron Technology, Inc. (MU) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
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