Weekly Market Review: Tech Leads Way Back to Record Highs

U.S. stocks rebounded about 2% this week. Investors returned from a long holiday weekend encouraged by the peaceful transfer of power in Washington D.C. on Wednesday. Prospective Treasury Secretary Janet Yellen said on Tuesday that now is the time to “act big” regarding economic stimulus measures.

Communication Services and Information Technology names led the way higher this week, while the Financial sector lagged. The Russell 2000 index, a proxy for smaller companies, is up nearly 10% in the first three weeks of 2021.

Coronavirus Update

It may no longer be the top news story in the financial press, but the coronavirus pandemic is still with us.

This week we passed the somber milestone of 25 million cases reported in the U.S. President Biden has set a target of 100 million vaccines administered in his first 100 days in office. This should help curtail the spread of COVID-19 in the coming months.

What to Expect Next Week

120 companies in the S&P 500 will post results next week, including these notable names:

Jan. 26: Johnson & Johnson (JNJ), Microsoft (MSFT) and Starbucks (SBUX)
Jan. 27: Apple (AAPL), Boeing (BA), Facebook (FB) and Tesla (TSLA)

Refinitiv estimates that aggregate profit from S&P 500 companies declined 5% in the final quarter of 2020, from a year ago. This could prove to be the low-water mark for corporate earnings however, as the firm also predicts that figure to rebound 24% in 2021.

On the economic front, Chairman Jerome Powell will make the next announcement about U.S. interest rate policy on Jan. 27. With short-term rates already at a range of 0 to 25 basis points, focus during his press conference will likely be on other potential ways the Federal Reserve can continue to support economic growth.

The following day, we’ll receive the preliminary GDP report. It is expected to show that the U.S. economy grew 3.9% in the fourth quarter of 2020. This would represent a return to a more normalized pace of growth, following two straight quarterly swings of more than 30 percent.

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

Stock of the Week: Camping World (CWH)

The company sells and services recreational vehicles (RVs) and related camping supplies.

The stock gained more than 15% this week. We believe this momentum can continue in the first half of 2021. Here’s why:

With travel to most countries (and even some states) off-limits, many Americans are choosing to hit the road for vacation.

This was apparent last November, when the retailer posted quarterly results that exceeded the consensus analyst estimates. Camping World earned $1.58 a share in the third quarter, as revenue increased 21% from the previous year, to $1.68 billion.

Management earmarked some of these newfound profits to a new $100 million stock buyback program. The company is also returning cash to investors through dividends. Camping World declared $1.48 a share of dividends in 2020, indicating a yield of 4.1%.

On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen insider buying, in addition to improving sentiment from analysts 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.