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2 Top Factors Buoy Wall Street Since Memorial Day: 5 Picks

Tirthankar Chakraborty

Wall Street ended the week prior to the three-day U.S. Memorial Day holiday with solid gains. Major bourses climbed more than 3% during the week as investors mostly shrugged off rising U.S.-China trade tensions and were hopeful that the impact of the coronavirus pandemic on corporate earnings will be mostly short-lived.

 

What’s more, markets are widely expected to continue the northward journey when traders return from the Memorial Day holiday weekend. This is primarily because of improving signs of consumer behavior during the weekend, which drew big crowds at beaches and casinos and resulted in an uptick in hotel bookings.

 

In fact, the Transportation Security Administration (TSA) data showed that nearly 250,000 travelers passed through the checkpoints last Saturday and Sunday, well above 87,534 travelers since mid-April. Similarly, hospitality firm STR showed that hotel occupancy jumped to 32.4% for the week ended May 16, up from 21% for the week ended Apr 11.

 

Many U.S. states lifted restrictions imposed to counter the spread of the virus just in time for the Memorial Day holiday weekend. Notably, Texas has allowed activities at bars and increased seating capacities at restaurants across the state. Among other states, Indiana has started allowing gatherings of up to 100 people, Alaska has allowed bars, restaurants and gyms to reopen, and North Carolina has let restaurants reopen.

 

Mississippi has allowed casinos to reopen, West Virginia permitted outdoor activities, and beaches at New York, New Jersey and Delaware have also reopened.

 

STR senior vice president Jan Freitag, in fact, has said that “all 50 states have at least partially reopened, so slow weekly demand growth should continue with more leisure activity around the country.”

 

Nonetheless, new developments pertaining to coronavirus treatment is another reason why the stock market is expected to scale higher. American biotech company Novavax, Inc. NVAX began its first human study of its experimental coronavirus vaccine on May 25, and expects preliminary results of the trial in July. In its Phase 1 clinical trial, Novavax’s novel coronavirus vaccine candidate NVX-CoV2373 that includes Matrix-M adjuvant has been helpful in boosting immune responses.

 

Once the Phase 1 trial is successful, Novavax said that the Phase 2 trial will begin in many countries including the United States and it will assess immunity, safety as well as focus on COVID-19 disease reduction among a broader age range.

 

By the way, another biotech company Moderna, Inc. MRNA reported positive results for its coronavirus vaccine trial last week. All 45 participants successfully developed coronavirus antibodies. Meanwhile, Moderna announced a 10-year partnership with Swiss contract drug maker Lonza to ramp up production of the experimental coronavirus vaccine.

 

Such positive news, nevertheless, will beat U.S.-China tensions, which in fact did show signs of escalation over the Memorial Day weekend.

 

5 Big Stock Winners

 

Given that the stock market is expected to trade higher on optimism surrounding a coronavirus vaccine and increasing consumer activity in the wake of easing lockdown measures, investing in stocks that make the most of such bullish trends seems prudent. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

 

Extended Stay America, Inc. STAY owns, operates, develops, and manages hotels in the United States. It serves customers in the mid-priced extended stay segment. The company currently has a Zacks Rank #2. Its expected earnings growth rate for the next year is a whopping 227.8%. In the past five-year period, the company has returned 4.6%.

 

Domino's Pizza, Inc. DPZ operates as a pizza delivery company in the United States and internationally. It operates through three segments: U.S. Stores, International Franchise, and Supply Chain. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the next quarter and current year is 10.7% and 14.2%, respectively. For the next year, the company’s expected earnings growth rate is at 7%.

 

Papa John's International, Inc. PZZA operates and franchises pizza delivery and carryout restaurants under the Papa John's trademark in the United States. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current quarter and year is 53.6% and 23.1%, respectively. For the next year, the company’s expected earnings growth rate is 29.2%.

 

Moderna develops therapeutics and vaccines based on messenger RNA for the treatment of infectious diseases. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the next five-year period is 33.6%.

 

Vertex Pharmaceuticals Incorporated VRTX, known for developing and commercializing therapies for treating cystic fibrosis, has provided $500,000 to Partners HealthCare to enhance testing capacity vital to limiting the spread of this virus. The company currently has a Zacks Rank #1. The company’s expected earnings growth rate for the current quarter and year is 65.9% and 65.1%, respectively. For the next year, the company’s projected earnings growth rate is 17.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

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Dominos Pizza Inc (DPZ) : Free Stock Analysis Report
 
Moderna, Inc. (MRNA) : Free Stock Analysis Report
 
Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report
 
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
 
Novavax, Inc. (NVAX) : Free Stock Analysis Report
 
Extended Stay America, Inc. (STAY) : Free Stock Analysis Report
 
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