Buy 5 Blue-Chip Stocks At A Bargain To Tap Stellar Dow Rebound
Zacks Investment Research | Mar 02, 2020 08:03PM ET
On Mar 2, the Dow has recovered some lost ground on news that several major central banks worldwide are likely to take initiatives to stimulate the global economy, which is currently grappling with the severe coronavirus outbreak. In fact, even other major stock indexes like the S&P 500 and the Nasdaq Composite, and European stock indexes witnessed significant turnaround on the same day.
Dow Makes a Historic Comeback
The 30-stock Dow — popularly known as Wall Street’s Blue-Chip index — rallied 5.1% or 1,293.96 points to close at 26,703.32. While historically this was the index’s biggest single-day gain on a pointwise basis, it was also its largest percentagewise gain since March 2009.
Notably, the blue-chip index plunged 13.4% in the previous seven trading days and had entered the correction territory in the previous week. Following Monday’s gain, the index is out of correction territory and is 9.7% away from its recent high (also all-time high) of 29,568.57 recorded on Feb 12.
Speculation Over Global Monetary Stimulus
Global equity investment space was rife with speculations that several large central banks will take a concerted effort to stimulate the global economy in order to minimize the impact of the coronavirus outbreak.
The Bank of Japan boosted investor confidence with announcement that it would provide "ample liquidity" to keep financial markets stable and bolster liquidity through short-term lending operations and asset purchases. The Bank of England also pledged to do what's necessary for the British economy's stability. The Reserve Bank of Australia reduced cash rate by 25 basis-points to a new low of 0.5%.
Christine Lagarde, president of the European Central Bank said “The ECB stand ready to take appropriate and targeted measures, as necessary and commensurate with the virus-related risks." In the United States, in a rare and unscheduled statement, Federal Reserve Chairman Jerome Powell reiterated Fed’s intention to act accordingly to address the risks posed by the coronavirus.
Notably, per the CME FedWatch, at present 100% probability is assigned for a 50 basis point rate cut in March. This probability was just 23% on Feb 28. Moreover, 100% probability is assigned for two more rate cuts of 25 basis-points by June. (Read More: Original post
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