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4 Stocks to Watch as Dow Breezes Past 25,000 Points

Zacks Equity Research

The Dow Jones Industrial Average managed to cross the impressive 25,000-point mark earlier this week for the first time in more than two months.

The index had touched its all-time high of 29,568.57 on Feb 12 before entering the virus-induced bear-market territory on Mar 11. However, the index closed at 25,548.27 after rising 2.2% on May 27, effectively crossing 25,000 points. And as of May 28, Dow Jones remained well above 25,000 points.

This is why investors seeking to enter financial markets again could add a couple of fundamentally sound stocks that are listed on the 30-stock index. Let us take a look at the index’s recent performance and the factors that are likely to push it ahead.

Dow Crosses 25,000 First Time Since March

Stocks took a minor dent on May 28 on news of President Donald Trump’s expected news conference on China on May 29. The index closed at 25,400.64 at the end of the May 28 session, after inching down 0.6%.

The index had taken a major hit since the coronavirus-triggered lockdown about two months ago.

However, the minor loss suffered by the index on May 28 could be short-lived as there are more positive factors on the horizon that are expected to impact it positively. The reopening of U.S. and global economies along with the possibility of a vaccine being made available by the end of the year are clearly optimistic news for the financial markets.

Optimism Over Economy Reopening

Some portion of the stay-at-home orders have been slowly lifted across all 50 states as of the Memorial Day weekend, with people being allowed to visit restaurants, places of worship, business centers and offices. Places such as gyms, athletic centers or salons have also started opening, although with certain rules and regulations.

Tech biggies such as Apple Inc. AAPL and Alphabet Inc. GOOGL have chalked out plans to open their stores this month. In addition, The TJX Companies, Inc. TJX which is the parent company of TJ Maxx, Marshalls and HomeGoods, also announced that it expects to open most of its stores by June-end.TJX Companies is the leading off-price apparel and home fashions retailer in the United States and abroad.

The optimism about reopening of the economy sent investors back to Wall Street again, in a bid to grab stocks that they had rushed out of roughly two months ago as lockdown restrictions were put in place in March.

COVID-19 Vaccines Likely to Hit Markets Soon

Lately, news on the front of vaccine trials has been good. Three key players in the biotechnology industry, Moderna, Inc. (MRNA), Novavax, Inc. (NVAX) and Merck & Co., Inc. (MRK) have been proactive in developing a vaccine for the deadly disease.

Moderna is developing a vaccine in collaboration with the National Institute of Allergy and Infectious Diseases. According to Dr. Anthony Fauci, the country’s leading infectious disease expert, results from the phase one trial of the vaccine was “really quite promising,” after he looked at the data.

Last week, Moderna had announced that the vaccine appeared to be safe and was able to stimulate an immune response against the virus. The vaccine produced neutralizing antibodies, which actively blocked the virus. Fauci also said that "we could have a vaccine that we could be beginning to deploy at the end of this calendar" or January 2021.

Second, earlier in the week, Novavax began human trials of its vaccine candidate in Australia. The first phase of the placebo-controlled trials will have 135 healthy adults enrolled and the preliminary round of data from that study is expected to be released in July this year.

Third, Merck also said that it was working on two potential vaccines and an experimental drug against the novel coronavirus. The company said on May 26 that it was acquiring an experimental vaccine as part of the purchase of its Austrian maker, while partnering in the progress of a second vaccine candidate and the probable drug.

Finally, GlaxoSmithKline plc GSK announced on May 28 that it planned to produce 1 billion doses of a vaccine adjuvant to build immunity against coronavirus next year. The adjuvant can lessen the amount of vaccine required per dose, thus allowing more people to be immunized and create longer-lasting immunity, the UK-based pharmaceutical company said in a statement on Thursday.

4 Stocks to Watch

We have, therefore, rounded up four blue-chip stocks that could gain from the aforementioned developments. All of these stocks carry a Zacks Rank #2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Microsoft Corporation MSFT has paced well ahead despite the lockdown. First, the company’s Xbox Game Pass service has been thriving amid social distancing measures. Microsoft revealed in April that the service had about 10 million subscribers. In addition, Xbox Game Pass members added more than 23 million friends on Xbox Live, which marks “70% growth in friendship rate” Xbox chief Phil Spencer said.

Second, Microsoft Bing released an interactive map earlier this month that allows users to observe the spread of coronavirus.The map offers up-to-date information about the number of confirmed cases around the globe and simplifies the information into the number of active cases, recovered and fatal ones by countries and also in U.S. states. The map draws data from the World Health Organization, the European Centre for Disease Prevention and Control, and United State’s Centers for Disease Control among other sources.

The Zacks Consensus Estimate for the company’s current-year earnings has moved 2.5% north in the past 30 days. Microsoft’s expected earnings growth rate for the current year is 19.8%. Microsoft belongs to the Zacks Computer - Software industry and currently carries a Zacks Rank #2.

Apple Inc. may have witnessed a decline in iPhone sales but the company welcomed higher revenues on its services front. The company’s revenues were shielded by a surge in demand for services such as its Apple TV streaming operation.

The company reported quarterly earnings of $2.55 per share for the quarter ended March 2020, which beat the Zacks Consensus Estimate of $2.09 per share. This compares to earnings of $2.46 per share a year ago. Apple’s revenues of $58.31 billion for the quarter also surpassed the Zacks Consensus Estimate by 8.65%. The the company surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters.

Apple is slowly opening its stores around the United States and in the rest of the world as restrictions are being lifted. It carries a Zacks Rank #2.

The Zacks Consensus Estimate for the company’s current-year earnings has moved 2.6% north in the past 30 days. Apple’s expected earnings growth rate for the current year is 3.5%. Apple belongs to the Zacks Computer - Mini computers industry.

The Zacks Consensus Estimate for the company’s current-year earnings has moved 61.9% north in the past 30 days. Chevron belongs to the Zacks Oil and Gas - Integrated - International industry.

Oil giant Chevron Corporation CVX is one of the largest producers of oil and natural gas in the Permian basin and its holdings in the region span across 2.2 million net acres. The company was operating 5 rigs in the Permian basin as of early May, according to chairman and CEO Mike Wirth.

The company reported quarterly earnings of $1.29 per share for the quarter ended March 2020, which beat the Zacks Consensus Estimate of 64 cents per share. This compares to earnings of $1.39 per share a year ago. Chevron also posted revenues of $31.50 billion for the quarter, which outpaced the Zacks Consensus Estimate by 5.43%. Chevron carries a Zacks Rank #3.

The Zacks Consensus Estimate for the company’s current-year earnings has moved 61.9% north in the past 30 days. Chevron belongs to the Zacks Oil and Gas - Integrated - International industry.

Pfizer Inc. PFE is a manufacturer and marketer of healthcare products. The Zacks Consensus Estimate for the company’s current-year earnings has moved 0.4% north in the past 30 days. Pfizer belongs to the Zacks Large Cap Pharmaceuticals industry. The company carries a Zacks Rank #3.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
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The TJX Companies, Inc. (TJX) : Free Stock Analysis Report
 
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