After peaking on Mar 22, the U.S. dollar lost its strength and slumped to its lowest level in nearly two years last month. Notably, the Bloomberg Dollar Spot Index, which measures the greenback against a basket of leading currencies, dropped more than 4% in July — marking the worst month since 2010. Overall, the index has fallen 10% from the high reached in March.
Investors have become skittish with a resurgence in coronavirus cases that could make it difficult for the U.S. economy to outperform its peers. According to data from Johns Hopkins University, the United States recorded more than 1.9 million new coronavirus cases in July, which is more than double the number of new cases recorded in any single previous month. The country added 46,321 new cases in 24 hours on Aug 3.
Additionally, a flare-up in tensions with China and uncertainty over the presidential election in November led to a decline in U.S. dollar. Further, rounds of downbeat data including GDP growth have added to the woes. In particular, the U.S. economy shrank deeper by a historic 32.9% in the second quarter as the COVID-19 pandemic halted business and industrial activities.
The weakness has also been attributed to expectations for more stimulus measures to revive a pandemic-ravaged economy and the failure to agree on a fiscal package. Apart from these, a fall in U.S. bond yields to record lows have added to the weakness in the greenback. Per Reuters calculations and U.S. Commodity Futures Trading Commission data, speculators’ net shorts on the U.S. dollar have soared to their highest level of $24.27 billion since August 2011.
A Boon for Mega Caps
A weak dollar has fueled a strong rally in the stock market, especially the blue-chip companies, which derive most of their revenues from international markets. This is because a weak dollar has made dollar-denominated assets cheap for foreign investors, making U.S. multinationals more competitive and leading to increased profits. As such, companies having a higher percentage of international sales may outperform.
Investors seeking to make profits from the ongoing trend might bet on mega-cap stocks. Though there are many stocks having a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), we have presented the ones that have shown strong momentum over the past month and thus have a Momentum Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nvidia Corporation NVDA
With a market cap of $270.8 billion, Nvidia is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. The stock has an expected earnings growth rate of 36.4% for fiscal year (ending Jan 2021). It has a Zacks Rank #3 and a Momentum Score of B.
PayPal Holdings Inc. PYPL
This company operates as a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide. It has an estimated earnings growth rate of 18.1% for this year. PayPal has a market cap of $231.2 billion and carries a Zacks Rank #1. It has a Momentum Score of B.
Tesla Inc. TSLA
This company designs, develops, manufactures, leases and sells electric vehicles, and energy generation and storage systems in the United States, China, the Netherlands, Norway and internationally. Its earnings are expected to increase to $8.66 per share this year from 13 cents last year. Tesla has a market cap of $276.7 billion and carries a Zacks Rank #3. It has a Momentum Score of A.
The Procter Gamble Company PG
It is a branded consumer products company which markets its products in more than 180 countries primarily through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, distributors, baby stores, specialty beauty stores, e-commerce, high frequency stores and pharmacies. The stock has an expected growth rate of 7.3% for the fiscal year (ending January 2022). It has a Zacks Rank #3 and a Momentum Score of B. The company has a market cap of $325 billion.
Facebook Inc. FB
It is the world’s largest social media platform offering multiple apps like photo and video-sharing app Instagram and WhatsApp messaging app. With a market cap of $717.9 billion, the stock has estimated earnings growth of 17.7% for this year. It has a Zacks Rank #3 and a Momentum Score of A.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research