Wall Street completed an impressive first half of 2021, after a stellar run in 2020 despite the pandemic. The momentum continued in the first month of the second half also. The three major stock indexes — the Dow, the SP 500 and the Nasdaq Composite — gained 1.2%, 2.3% and 1.2%, respectively, in July.
In fact, market's benchmark — the S&P 500 Index — completed a six-month winning streak after declining in January. In the first seven months of this year, the tech-heavy Nasdaq Composite ended in red only in May. The blue-chip Dow dropped in January and fell marginally in June.
This shows that Wall Street has remained in the growth trajectory so far this year, with the Dow, the S&P 500 and the Nasdaq Composite up 14.1%, 17% and 13.9%, respectively. The momentum is likely to prevail in the rest of 2021 too.
The U.S. economy exceeded the pre-pandemic level in second-quarter 2021 supported by the great reopening. Consumer spending that accounts for nearly 70% of the GDP, remained robust. The core (excluding volatile food and energy items) personal consumption expenditure (PCE) jumped 6% in the second quarter from an upwardly revised 2.7% in the previous quarter.
The core PCE inflation —- Fed's favorite inflation gauge — climbed 3.5% annually in June, its highest since July 1991. However, the data was slightly above May's reading of 3.4% and fell below the consensus estimate of 3.6%. Moreover, personal consumption returned to the positive territory with a gain of 1% in June after declining 0.1% in May.
The Conference Board reported that the consumer confidence index increased to 129.1 in the month, marking its highest level since February 2020. The short-term expectations of inflation declined in July . Consequently, spending intentions picked up last month, with a larger percentage of consumers saying that they planned to purchase homes, automobiles, and major appliances in the coming months.
U.S. businesses across sizes are expanding their scale of operations and hiring more despite soaring wages and salaries to cater to robust demand. The National Federation of Independent Business Small Business Optimism Index rose 2.9 points in June to reach a pandemic-era high of 102.5.
The personal savings of Americans are around an astonishing $2 trillion. The sky-high savings are allowing people to indulge in their demands that were pent up during lockdowns and in turn compelling businesses to expand their scale of operations.
The Biden administration's $1 trillion infrastructure plan could be a major driver for the U.S. economy. It includes about $550 billion in new spending in addition to $450 billion that was previously approved. Segments like basic materials, industrials, communication infrastructure developers and utilities will benefit immensely along with more job creation for the economy.
Finally, in its latest report released on Jul 27, the IMF said that economic growth of different countries will depend to a large extent upon how they are rolling out the COVID-19 vaccines. The economic outlook is improving for advanced economies, where nearly 40% of the population has been vaccinated.
In the United States, nearly 50% of the population has already been vaccinated. The government is deploying COVID-19 vaccines nationwide on a priority basis. In fact, the resurgence of the Delta string is likely to compel Americans to get vaccinated urgently.
Our Top Picks
We have narrowed down our search to six large-cap (market capital > $10 billion) momentum stocks that witnessed robust earnings estimate revisions in the last 7 days and have strong upside left for 2021.These stocks have provided double-digit returns year to date. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performanc e of our six picks year to date.
Image Source: Zacks Investment Research
ConocoPhillips COP holds a bulk of acres in the three big unconventional plays, namely Eagle Ford shale, Delaware basin and Bakken shale, which are rich in oil. The upstream energy player also has a foothold in Canada’s oil sand resources and exposure to developments related to liquefied natural gas.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3.3% over the last 7 days. The stock price has climbed 40.2% year to date.
Ford Motor Co. F has a strong vehicle mix supported by the F-series trucks and SUV models, including Escape, Explorer, Expedition, EcoSport and Edge. These among others are expected to bolster the company’s revenues. Mustang Mach-E is already the second-best-selling electric SUV in the United States. The Ford+ plan, with a deep focus on increasing profitability, exploring e-mobility and enhancing customer experience augurs well.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 21.8% over the last 7 days. The stock price has soared 58.7% year to date.
EOG Resources Inc. EOG explores, develops, produces and markets crude oil, and natural gas and natural gas liquids in the United States and internationally. The upstream energy player has an attractive growth profile, huge inventory of drilling opportunities, upper quartile returns and a disciplined management team. It has significant acreages in oil shale plays like Permian, Bakken and Eagle Ford.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings moved up 2% over the last 7 days. The stock has jumped 46.1% year to date.
Apple Inc.'s AAPL Services and Wearables businesses are expected to drive top-line growth in fiscal 2021 and beyond. Although Apple’s business primarily runs around its flagship iPhone, the Services portfolio has emerged as the company’s new cash cow. Its focus on autonomous vehicles and augmented reality/virtual reality technologies presents growth opportunity in the long haul.
The company has an expected earnings growth rate of 70.4% for the current year (ending September 2021). The Zacks Consensus Estimate for the current year improved 7.7% over the last 7 days. The stock price has surged 9.9% year to date
Reliance Steel & Aluminum Co. RS is witnessing a sustained increase in demand in the non-residential construction market (its biggest end market). Reliance Steel’s core business strategy is to enhance operating results by strategic acquisitions. With the acquisition of Metals USA, it added about 48 service centers, which are strategically located throughout the United States.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has moved up 14% over the last 7 days. The stock has appreciated 31.2% year to date.
Watsco Inc. WSO continues to aggressively invest in technologies to transform customer experience. The company is investing to improve customer experience through e-commerce. Watsco is deploying technology that improves order fill rates with speed and accuracy. It has the industry’s largest database of digitized product information.
The company has an expected earnings growth rate of 39.5% for the current year. The Zacks Consensus Estimate for its current-year earnings moved up 1.8% over the last 7 days. The stock has advanced 24.7% year to date.
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