After witnessing a noteworthy December, the Dow continued its advances this year. The 30-stock blue-chip index closed higher in the last six trading sessions, its longest winning streak since the period ending on Dec 19, when the index notched an astounding nine-day winning streak. The Dow is currently trading above the 39,000 threshold, with market participants eagerly waiting for the index to surpass the 40,000-point mark.
However, the blue-chip index time and again found it problematic to cross a multi-zero barrier. Eclipsing the 40,000 barrier remained an uphill task due to the pandemic, elevated interest rates and relentless volatility among high-flying tech stocks. But fortunately, things are looking up at the moment. A “Goldilocks” economic circumstance is expected to take the heat off price pressures and compel the Federal Reserve to ease its monetary policy this year.
The U.S. economy added 175,000 new jobs in April, the smallest increase in hiring since September, and way less than analysts’ prediction of 240,000 new job additions. At the same time, the jobless rate ticked up to 3.9% from 3.8% and is now tantalizingly close to the 4% mark. In contrast, the uptick in wages over the past 12 months slowed to 3.9% in April from 4.1% in the prior month, the lowest level in three years.
With fewer jobs and a decline in pay, consumers’ tendency to spend will decline and eventually curb inflationary pressure. This, in turn, will compel the Fed to cut interest rates. Fed Chair Jerome Powell, by the way, has ruled out any interest rate hike in its upcoming policy meetings. Needless to say, interest rate cuts boost consumer outlays, and curtail borrowing costs, leading to economic growth and helping the stock market scale northward. Hence, the odds of the Dow blowing past the 40,000 mark seem just a matter of time.
Amid such optimism, it’s judicious for astute investors to invest in fundamentally solid blue-chip stocks such as Amazon.com, Inc. AMZN, The Goldman Sachs Group, Inc. GS and Salesforce, Inc. CRM that are well-poised to take advantage of the Dow’s uptrend. Being blue-chip stocks, they have sturdy balance sheets, steady cash inflows and large market capitalization. They currently have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Amazon is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe.
The Zacks Consensus Estimate for its current-year earnings has moved up 11.8% over the past 60 days. AMZN’s expected earnings growth rate for the current year is 56.6%. Its projected earnings growth rate for the next five-year period is 29.6%.
Goldman Sachs is a leading global financial holding company.
The Zacks Consensus Estimate for its current-year earnings has moved up 9.8% over the past 60 days. GS’ expected earnings growth rate for the current year is 57.8%. Its projected earnings growth rate for the next five-year period is 8.8%.
Salesforce is the leading provider of on-demand Customer Relationship Management (CRM) software.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 60 days. CRM’s expected earnings growth rate for the current year is 18.1%. Its projected earnings growth rate for the next five-year period is 17.4%.
Shares of Amazon, Goldman Sachs and Salesforce have gained 23.7%, 15.9%, and 6%, respectively, year to date.
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