Bulls appear to be taking control of the market, helped by strong economic growth prospects and a loose monetary policy after signs that inflation is accelerating.
The S&P 500 ended the week near a record, while the small cap Russell 2000 index posted its eighth consecutive month of gains—the longest run for this benchmark since 1995. This performance is quite remarkable and shows the strength of the U.S. economic recovery after the COVID-19 pandemic.
The Fed has said it would tolerate an average range of inflation around its 2% target until it sees inflation sticking at a higher level. Inflation has been running mostly below 2%, prior to the latest numbers which showed strong price gains. Some analysts now see higher spending by both consumers and government is the key factor boosting growth in the second-half of the year.
US President Joseph Biden issued his first full budget proposal last week, detailing his ambitions to expand the size and scope of the federal government with more than $6 trillion in spending over the coming fiscal year. Amid this optimism, here are three large-cap stocks we’re monitoring during this coming week's holiday shortened trade.
1. Zoom Video
Zoom Video Communications (NASDAQ:ZM) will report first quarter earnings for its fiscal 2022 year after the market closes on Tuesday, June 1. Analysts are projecting $0.99 a share profit on sales of $907.61 million.
The video communications platform leader had a great year during the pandemic, when stay-at-home requirements and remote-work trends boosted its sales significantly. Sales and profit have consistently beat estimates every quarter, and the company kept raising its guidance.
In March, Zoom told investors that sales in the current fiscal year could jump 43%, indicating that the pandemic-fueled demand for conferencing tools is still going strong. But with the global vaccination drive gaining pace, it’s not clear whether companies that did well during the pandemic would continue to see meteoric growth.
The San Jose, California-based company’s shares, after gaining 400% last year, have failed to impress investors this year. Trading at $331.53 as of Friday's close, they were down 2% for the year.
2. Broadcom
The final, big chipmaker to release earnings this current season is Broadcom (NASDAQ:AVGO). The company will report its fiscal 2021, second-quarter earnings after the market closes on Thursday, June 3. Analysts are expecting $6.43 a share profit with the projected sales of $6.51 billion.
In the latest earnings report, investors will be eager to know whether the company's current strategy, spearheaded by CEO Hock Tan—to grow through acquisitions as well as buying software assets that are struggling—is paying off.
Broadcom is one of the world’s largest chipmakers with lines of business spanning smartphone parts, key components of networking equipment and semiconductors that run home Wi-Fi gear and set-top boxes.
About 90% of Broadcom’s 2021 supply has already been ordered by customers, the company said in March, adding that the chipmaker had enough production from its outsourced providers to meet the needs of its customers. Broadcom shares, which closed at $472.33 on Friday, have gained about 8% this year and about 65% during the past 12 months.
3. DocuSign
The e-signature company, DocuSign (NASDAQ:DOCU) is another tech sector stalwart reporting its quarterly earnings after the market close on Thursday. Analysts see $0.28 a share profit on sales of $438 million.
The San Francisco-based application software business experienced explosive growth for its digital services, as the shift to remote work and social distancing prompted companies to seek digital signatures and manage their contracts electronically.
These trends contributed to DocuSign being among Wall Street’s biggest 2020 success stories after its shares skyrocketed, behind Zoom Video and vaccine-maker Moderna (NASDAQ:MRNA).
According to the company’s CEO, Dan Springer, DocuSign is still in its early stage of growth in what he predicts is a $50-billion addressable market. DocuSign stock closed on Friday at $201.62, down about 9% for the year.