Weekly Market Review: Dow Drives the Way Higher

U.S. stocks rallied about 3% this past week, led by the Consumer Discretionary and Real Estate sectors. The Dow Jones Industrial Average was the big winner. It gained more than 4% and reached new record levels in each session.

One reason for bulls to rejoice was that President Biden signed the latest COVID-19 relief bill on Thursday. It injects another $1.9 trillion of aid into the U.S. economy. The plan includes direct stimulus payments of $1,400 for qualified individuals and $300 of weekly Federal unemployment benefits. It also gives $350 billion of support to state and local governments.

The broader market averages increased last week even as long-term Treasury yields continued to rise. The benchmark U.S. 10-year note is at 1.63%, which is the highest level since before pandemic began.  

Yields are moving higher as the global economy is reopening. However, there’s also the specter of rising inflation around the corner. On Friday, it was reported that the Producer Price Index (PPI) increased 2.8% (2.5%, excluding food and energy) in February.

Coronavirus Update

This past week marked the anniversary of the COVID-19 pandemic taking hold in the U.S., causing unprecedented business and travel restrictions. While we celebrated the milestone of 100 million vaccine doses administered, there’s also the solemn reminder of more than 546,000 American lives that have been lost. The number of reported cases globally recently topped 120 million, including 30 million in the U.S. alone.

What to Expect Next Week

FedEx (FDX) and Nike (NKE) highlight a relatively quiet earnings calendar next week. On the economic front, we’ll get a look at February Retail Sales on Tuesday, followed by the Federal Reserve’s latest interest rate decision Wednesday.

Inflation hawks will be keeping an eye out for any change in Fed policy; Chair Jerome Powell has pledged to keep short-term interest rates low to support recovery of the U.S labor market.

Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 2021.

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 Industrial name is worth a closer look and is our Stock of the Week.

Stock of the Week: Mueller Industries (MLI)

The company makes industrial components from base metals and alloys, such as aluminum, brass and copper.

The stock gained 7% this week and we believe this momentum can continue in the first half of 2021. Here’s why:

Mueller recently boosted its quarterly dividend by 30%, to $0.13 a share (1.2% yield). Investors at the close of trading on March 17 will qualify for the payment on April 2.

Not many firms have increased their payouts in the past year, so this was a key sign of confidence from the company. In Mueller’s case, the business generates sufficient cash flow to back up that claim.

Last month, the company posted 28% annual earnings per share growth in the fourth quarter of 2020. The result was leveraged from a 24% improvement in revenue, as copper prices increased and management kept a tight lid on costs.

The stock is currently priced at 13.1x expected full-year profit of $3.15 a share. Mueller is trading at a discount to the broader market and the industry average of 24x, even though it’s expected to post double-digit earnings growth for a fourth consecutive year in 2021.

In addition, the company carries a Smart Score of 9/10 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 shares have seen improving sentiment from analysts, hedge funds 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.