Stocks closed at their lowest level in 2 months on Tuesday, weighed down by a surge in the dollar. The euro lost the most against the dollar, following renewed fears regarding an interest rate hike by the Fed. Look for these 5 stocks to perform despite the turnover.
Stocks closed at their lowest level in 2 months on Tuesday, weighed down by a surge in the dollar. The euro lost the most against the dollar, following renewed fears regarding an interest rate hike by the Fed. A stronger dollar also resulted in lower oil prices, leading to losses for energy stocks.
The Dow slumped 1.9%, experiencing its biggest one-day loss in 5 months in terms of points. The S&P 500 and the Nasdaq both lost 1.7%. The blue-chip index and S&P 500 also sank below their 50-day moving averages, erasing their gains for the year.
However, the Nasdaq managed to protect yearly gains of 2.6%. For the Dow, United Technologies Corp. (UTX -Analyst Report) emerged as the largest decliner. All its other components took losses, with only DuPont (DD - Analyst Report) emerging unscathed.
The surge in the US dollar was possibly the reason for Tuesday’s losses. Renewed fears regarding an interest rate hike was believed to be the primary cause for the dollar’s ascent. Investors anticipated that the Fed will consider a rate hike in the second half of this year as strong jobs data suggested that the labor market is improving.
A stronger US dollar also weighed on oil prices. Key energy stocks, including EOG Resources, Inc. EOG, Chevron Corp. (CVX - Analyst Report), Exxon Mobil Corp. (XOM - Analyst Report) and Marathon Oil Corp. MRO declined 1.7%, 1%, 1.1% and 1.8%, respectively.
A stronger dollar is expected to hurt US companies on 2 different counts. Firstly, quarterly results of companies with a large proportion of foreign sales will be affected. Revenues of international divisions will appear lower when they are repatriated in terms of the relatively stronger dollar. Johnson & Johnson (JNJ -Analyst Report), IBM (IBM - Analyst Report), Procter & Gamble (PG - Analyst Report) and Microsoft (MSFT - Analyst Report) are among those who have expressed concerns about how a surging dollar will hit profits.
Additionally, products of foreign companies will become relatively cheaper. This will hit U.S. companies on their home turf as well as in foreign markets. The Hershey Company (HSY - Analyst Report) has already been affected, with international sales declining. Meanwhile, General Motors GM and Ford (F -Analyst Report) will be at a disadvantage against their European competitors both at home and abroad if the dollar continues to rise.
This is also because the euro has declined rapidly recently, plunging to a near 12-year low on Tuesday. The euro lost nearly 1.4% against the US dollar to drop to $1.07. The European Central Bank’s (ECB) quantitative easing program was also an important factor behind the euro’s slide. The program has pushed Eurozone bond yields to their lowest levels ever.
ECB President Mario Draghi has said the ECB will purchase these bonds even if they have a negative yield. As announced in January, ECB will buy government bonds worth 60 billion euros a month through a quantitative easing program.
Below we present 5 stocks which survived the slump, each of which also has a good Zacks Rank.
Hyperion Therapeutics, Inc. (HPTX) is a company from the biopharmaceuticals sector. It concentrates on developing therapeutics for orphan diseases in the US, Canada, and other countries.
Hyperion Therapeutics holds a Zacks Rank #2 (Buy) and gained 9.9% Tuesday to close at $32.82. The stocks’ earnings estimates for the current year were revised 4.9% upward over the last 60 days.
Ocwen Financial Corp. (OCN - Analyst Report) is engaged in a variety of businesses related to residential and commercial mortgage servicing, real estate asset management, asset recovery and global outsourcing.
Ocwen Financial holds a Zacks Rank #2 (Strong Buy) and gained 9.3% Tuesday to close at $9.50. The stocks’ earnings estimates for the current year have been revised significantly upward over the last 60 days.
Pinnacle Entertainment Inc. PNK is an owner, developer and operator of casinos in the US It is also an operator of related hospitality and entertainment facilities.
Pinnacle Entertainment holds a Zacks Rank #2 (Buy) and gained 6.7% Tuesday to close at $33.74. The stocks’ earnings estimates for the current year were revised 5% upward over the last 60 days.
Express Inc. EXPR is a retailer of specialty apparel and accessories, focusing on the US It offers products for both men and women in the 20 to 30 year age group.
Express holds a Zacks Rank #2 (Buy) and gained 6.1% Tuesday to close at $14.95. The stocks’ earnings estimates for the current year were revised 4.1% upward over the last 60 days.
SUPERVALU Inc. (SVU - Analyst Report) is one of the leading companies in the US grocery business. The company operates through three retail food store formats -- combination stores, food stores and limited assortment food stores.
SUPERVALU holds a Zacks Rank #2 (Strong Buy) and gained 5.7% Tuesday to close at $10.77. The stocks’ earnings estimates for the current year were revised 3% upward over the last 60 days.
It is likely that rate hike fears will dominate market proceedings in the days ahead. However, stocks remain on a strong footing in the longer term and encouraging economic data could boost markets. Thursday’s retail sales data will provide valuable insight into growth in terms of consumer demand. For now, adding these stocks to your portfolio would make for a prudent choice.
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