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Weekly Market Review: Breaking Through to New Highs
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Weekly Market Review: Breaking Through to New Highs

U.S. stocks managed just fractional gains this week; however, the big news was that the S&P 500 traded above its pre-pandemic highs. Technology names led the way up, as Apple reached its own milestone, topping $2 trillion of market capitalization.

Investors ignored the fact that Congress did not make progress on an economic relief bill, and that scheduled trade talks between China and the U.S failed to materialize. Rather, bulls were encouraged by robust data coming out of the housing sector.

On Monday, the NAHB Housing Market index printed a record high reading for August. Tuesday also saw double-digit sequential increases reported for both July housing starts and permits. On Friday, existing homes sales also posted record growth for July.

Coronavirus Update

While it may no longer be the top news story in the financial press, the coronavirus pandemic is still with us. This week, multiple colleges/universities decided to move classes back online, when clusters of new cases popped up soon after students returned from summer recess.

If the pandemic continues to spread, it will likely hamper the positive trajectory of economic recovery reported in recent months.

What to Expect Next Week

Next week will be busy on the economic front, including more housing data. Tuesday brings the August Consumer Confidence reading, followed by Wednesday’s report of Durable Goods Orders. On Thursday, we’ll see the revised reading of second-quarter GDP.

Best Buy (BBY) and Salesforce.com (CRM) headline the earnings calendar next week.

Following the snap-back recovery in stocks over the past few months, we believe that investment gains will be harder to come by in the second half of the year.

As a result, deciding what and when to buy can be challenging for any investor.

However, the fact remains that attractive investments are out there if you’re willing to dig a little deeper.

One such Retail name is worth a closer look and is our Stock of the Week.

Stock of the Week: Lowe’s (LOW)

The company operates over 2,200 home-improvement retail locations throughout North America. Lowe’s is a clear beneficiary of the robust U.S. housing data reported this week which is being aided by low interest rates.

The stock gained nearly 5% this week and we believe this positive momentum can continue throughout the second half of the year.  Here’s why:

Management delivered blowout quarterly results on Wednesday. Lowe’s earned $3.75 a share in the July quarter, as revenue increased 30% from a year ago, to $27.3 billion.

Upside in the period was driven by consumer spending on home improvement. The company noted that sales momentum has continued into August as customers are buying more lumber, paint, tools, and cleaning supplies.

Following the quarter, DA Davidson analyst Michael Baker boosted his price target to $185 (14.4% upside potential), citing:

“… LOW is showing the internal improvements hoped for when the new management team took over just over two years ago. The environment is helping, but the management team has put the company in a position to capitalize on the external factors. As such, we think LOW is showing enough to believe in the longer term sales and margin growth story. This combination leads to above average EPS growth, which we believe warrants an above average multiple.”

Management offered another boost of confidence on Friday, increasing the quarterly dividend to $0.60 a share (1.5% yield). Investors at the close of trading on Oct. 19 will qualify for the next payment on Nov. 4.

It’s also worth noting that the stock carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.

On top of the positive aspects mentioned already, the Smart Score indicates that the company has seen improving sentiment from investors (both professional and individuals) and financial bloggers.

FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.

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