After struggling in 2018, wherein all three major indexes — the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite — finished in the red, U.S. stocks rebounded brilliantly in 2019, which is in its last leg. In fact, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite touched new highs on multiple occasions this year, and are poised to end 2019 on a healthy note. Notably, the S&P 500 hit the 3,000 level for the first time in its history this July.
The fact that 2019 has been an extremely rewarding year so far for Wall Street can be gauged from the fact that the tech-heavy Nasdaq, the S&P 500 and the Dow Jones Industrial Average have gained 32.4%, 27.1% and 20.9%, respectively, on a year-to-date basis (as of Dec 18).
Given this rosy backdrop, let’s delve deeper to unearth the reasons behind the U.S. stocks’ impressive performance, so far this year, after struggling in 2018:
Wall Street had a tumultuous 2018 primarily due to trade fears, interest-rate uncertainty and a partial government shutdown. However, 2019 has largely seen positive developments on the trade front.
With the U.S. stock market movement being predominantly based on trade-related news/rumors, the agreement between the United States and China regarding phase one of the trade deal, earlier this December, found huge favor with investors, although the nations are expected to sign the agreement only next January. The United States has agreed to ease tariffs for certain exports from China. The deal also includes China’s commitment to purchase a significant amount of U.S. farm, energy and manufactured goods. This development has given birth to hopes that the 17-month long-standing trade war between the two largest economies in the world could finally come to an end.
Markets were also driven by the Federal Reserve's three interest rate cuts this year. The central bank lowered its benchmark interest rate in July, September and October, in a bid to lay recession fears to rest. Following the successive rate cuts, it has become cheaper for customers to borrow money for buying cars and houses, and starting new businesses. The benchmark interest rates have currently been kept by the Fed in the 1.50-1.75% band.
Moreover, the U.S. economy’s steady expansion pace in 2019 has buoyed markets. The pace of U.S. economic expansion picked up in the third quarter this year. Per the Bureau of Economic Analysis, the economy grew at an annualized rate of 2.1% in the three-month period ended Sep 30, higher than the initial estimate of 1.9% and the 2% pace in the second quarter.
Also, consumers remain confident about their well-being. According to the University of Michigan’s preliminary data, U.S. consumer sentiment touched a seven-month high In December.Additionally, markets have been positively impacted this year, thanks to the easing of Brexit-related uncertainties.
The upbeat sentiment witnessed by Wall Street in the current year will likely continue into the next year as well. Tailwinds like easing of trade-war-related uncertainties between the United States and China, possibility of the Fed not hiking interest rates, and more clarity on the Brexit-front might result in stocks moving north in 2020 as well.
Some Faltering Stocks in 2019 Poised to Rebound
Despite the overall bullish scenario, some stocks did not make hay in 2019. However, with Wall Street’s impressive run this year, identifying stocks which failed to shine is not an easy task. To simplify the procedure, we have utilized the Zacks Stock Screener to identify stocks with a price decline in excess of 20% so far this year. Additionally, these stocks have a market capitalization of more than $1 billion.
Furthermore, with anticipations of a rewarding 2020, as hinted in the write-up, the above-discussed stocks that faltered this year might have a revival in their fortunes in the next. To identify the same, the selected stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy) as well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Alkermes plc ALKS is based in Dublin. This Zacks Rank #2 company has a diversified product portfolio and a promising pipeline of candidates targeting major central nervous system disorders including schizophrenia, depression, addiction and multiple sclerosis.The company has a market capitalization of $3.2 billion. Alkermes’ shares have shed 30.4% of the value so far in 2019. Its expected earnings growth rate for the next year is 13.5%, higher than the industry's projected rise of 7%.
Baidu BIDU, sporting a Zacks Rank of 1, is based in Beijing. It is a leading Chinese Internet search and advertising company. The company has a market capitalization of $43.3 billion. Baidu shares have shed 21.9% so far this year. Baidu's estimated earnings growth rate for the next year is 51.4%, higher than its industry's projected rise of 19.4%.
Groupon GRPN operates a website that offers daily discount deals. This Zacks #2 Ranked company is headquartered in Chicago, IL. The company has a market capitalization of $1.3 billion. Groupon’s shares have shed 25.3% of the value, year to date. The stock’s expected earnings growth rate for the next year is 20.8%, higher than its industry's projected rise of 14%.
San Francisco, CA-based Nektar Therapeutics NKTR is a biopharmaceutical company. This Zacks Rank #2 company focuses on the development of treatments utilizing its PEGylation and advanced polymer conjugate technology platforms. The company has a market capitalization of $3.8 billion. Nektar Therapeutics shares have shed 34.7% of the value so far this year.
Founded in 1950, and headquartered in Hamilton, Bermuda, Signet Jewelers SIG is a retailer of diamond jewelry, watches as well as other products. The company carries a Zacks Rank #2 and has a market capitalization of $1.1 billion. Signet Jewelers shares have shed 34.5% of the value in the year-to-date period.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
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Groupon, Inc. (GRPN) : Free Stock Analysis Report
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