1 Stock To Buy, 1 To Dump When Markets Open: Amazon, Bank of America
By: Jesse Cohen/Investing.com | June 20, 2021
Stocks on Wall Street tumbled on Friday, with the Dow and S&P 500 suffering their worst week in months as worries whether the Federal Reserve could start raising rates sooner than expected spooked the market.
The blue-chip Dow Jones Industrial Average posted a weekly loss of 3.5%—its biggest drop since October—as investors rotated out of value stocks. The benchmark S&P 500, meanwhile, fell 1.9%, its greatest weekly loss since February.
The NASDAQ Composite, performed less badly, losing just 0.3% over the same timeframe as the tech trade came back into favor.
This week, we'll have another batch of notable earnings reports from companies like Nike (NYSE:NKE), and FedEx (NYSE:FDX), as well as key Congressional testimony from Fed Chair Jerome Powell. It'll be a busy week ahead for Wall Street.
Bucking any market trends this week, below we highlight one stock likely to be in demand and another which could see further downside.
Remember though, our timeframe is just for the upcoming week. Stock To Buy: Amazon
This is a big week for Amazon.com (NASDAQ:AMZN), as it will kick off it's annual Prime Day shopping extravaganza—which is expected to be one of the biggest shopping events in history—at 3:00AM ET on Monday.
The two-day event, which gives Prime members a chance to score incredible deals, will include discounts on more than two million items, according to the company.
While the e-commerce giant does not release official Prime Day sales figures, many are expecting online spending during this year’s event to eclipse last year’s total.
According to the digital research arm of software company Adobe, Amazon's 2021 Prime Day is forecast to rake in $11 billion, compared to sales of $10.4 billion during last year’s event, which occurred in October due to the COVID-19 pandemic.
Furthermore, 6 in 10 Americans surveyed told Adobe they plan to shop during Prime Day this year.
"We expect Prime Day this year will surpass the 2020 Cyber Monday levels" of spending, said Jason Woosley, vice president, commerce product and platform, at Adobe Experience Cloud. "It's a huge lift happening in the middle of June."
Amazon Daily Chart
AMZN stock ended at $3,486.90 on Friday, less than 2% below its record high of $3,552.25 reached back in September.
With a valuation of $1.76 trillion, the Seattle, Washington-based e-commerce and cloud giant is the third most valuable company listed on the U.S. stock exchange, trailing only Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT).
That said, Amazon has been a relative laggard amongst the large-cap tech leaders this year, gaining only about 7% in 2021, as pandemic-era lockdown restrictions eased, and consumers flocked back to physical retail stores in greater numbers.
However, the stock has been trading incredibly well lately, rallying in seven of the past nine trading sessions, despite broader market volatility.
Despite worries over looming antitrust reform—the U.S. House Judiciary Committee plans to vote this week on a package of six antitrust bills targeting the market power of Big Tech—AMZN stock appears to be a safe bet this week, as investors move back into tech names at the expense of economy-linked stocks, such as industrials, materials, and financials. Stock To Dump: Bank of America
And speaking of financials, Bank of America (NYSE:BAC) shares look set to stay under pressure in the coming days as investors fret over the negative impact of the Federal Reserve’s policy update on the company’s bottom line.
Financial stocks of all sizes sold off last week after Federal Reserve officials signaled that interest rates will need to rise sooner and faster than they had previously anticipated due to soaring inflation.
The Fed’s hawkish shift unleashed a huge repositioning in global financial markets, including bonds.
The U.S. 10-year yield jumped to as high as 1.59% after the Fed’s update, but fell back down to around 1.44% by Friday afternoon, in the midst of worries over future economic growth prospects.
US 10-Yr Daily Chart
Lower interest rates hurt the return on interest that banks earn from their loan products, or net interest margin—the difference between the interest income generated by banks and the amount of interest paid out to their depositors.
Given the flurry of repositioning in the bond market, BAC stock looks like a vulnerable investment in the near term.
Bank of America Daily Chart
Bank of America has thrived throughout most of this year, reaping the benefits of a recovering economy, robust investment banking activity and narrowing credit loss exposure.
However, after rallying to its best level since March 2008 at $43.49 on June 3, BAC stock has since lost momentum, tumbling roughly 11% to close at $38.78 on Friday.
Despite recent losses, shares of the Charlotte, North Carolina-based lender have gained 28% in 2021.
At current levels, BofA has a market cap of roughly $332.3 billion, making it the second biggest U.S. banking institution, behind JPMorgan Chase (NYSE:JPM). Read Full Story »»» DiscoverGold