COVID-19 cases may cause an S&P 500 correction, analyst says. Buy these stocks in the next dip.

3 months ago 20
PR Distribution

It’s a unsmooth commencement to the week for markets. Stocks sold disconnected successful Asia and Europe, and Dow industrials futures tumbled much than 300 points mounting the code for a turbulent time ahead.

Blame rising COVID-19 cases globally, and the dispersed of the much infectious delta variant of coronavirus.

What we’re seeing successful markets is simply a “July chop” triggered by the delta variant, according to expert Thomas Lee of Fundstrat Global Advisors. Our call of the day is from Lee, who said that delta variant concerns could pb to a 5% correction for the S&P 500 SPX, -0.75%, mounting up definite types of stocks for a beardown rally done the remainder of 2021.

Daily U.S. COVID-19 cases are approaching the 30,000 mark, but determination is simply a hazard that infections could spell “parabolic” with the dispersed of the delta variant, and emergence to astir 100,000, Lee said. 

The delta variant could make panic, due to the fact that markets and investors typically absorption connected lawsuit counts arsenic opposed to hospitalizations, Lee said — and arsenic galore arsenic 82 cardinal Americans stay unvaccinated oregon without COVID-19 antibodies. However, hospitalizations stay low.

This delta variant has a batch of “bark” and is unnerving for investors, Lee said, adjacent if there’s not a beardown “bite.” It could adhd value to a “July chop” that has past connected its side. Since 1928, a beardown archetypal fractional of the twelvemonth leads to a level oregon antagonistic July.

While the S&P 500 was up 0.7% successful July arsenic of the extremity of past week, “this belies the convulsive assemblage rotations taking spot wrong the broader market,” Lee said.

The Fundstrat expert said that helium doesn’t expect the chop caused by the delta variant to origin a 10% oregon larger diminution successful stocks, but a 5% driblet for the S&P 500 is possible.

So portion there’s small crushed to beryllium hugely bearish — due to the fact that enslaved spreads bespeak wider stableness for stocks, and volatility measures are not signalling broader weakness — this “vicious” risk-off correction creates opportunities.

Lee is bullish connected “epicenter” stocks — shares successful companies battered by the pandemic and acceptable to payment from the reopening — similar travel, user discretionary, energy, and basal materials. As well, Fundstrat is overweight connected Big Tech, with the likes of Facebook FB, -0.96%, Apple AAPL, -1.41%, Amazon AMZN, -1.59%, Netflix NFLX, -2.33% and Google proprietor Alphabet GOOGL, -0.03% considered beardown picks.

The buzz

Billionaire capitalist Bill Ackman’s blank-check, special-purpose acquisition institution Pershing Square Tontine Holdings PSTH, -1.81% will not proceed with its projected acquisition of a 10% involvement successful Universal Music Group, owned by French media elephantine Vivendi VIV, -1.71%. Instead, his Pershing Square Holdings radical volition marque the investment. 

On the U.S. economical front, investors tin expect the National Association of Home Builders’ lodging marketplace scale for July, which measures the marketplace conditions for the merchantability of caller single-family homes.

OPEC+, the radical of oil-producing countries including Russia and Saudi Arabia, agreed connected Sunday to further unbend lipid accumulation cuts arsenic request for crude continues to emergence and terms soar. Production volition emergence by 400,000 barrels a time each period opening successful August and volition yet undo each of the pandemic-era curbs.

Zoom plans to bargain Five9 FIVN, +0.58% successful an all-stock woody valuing the supplier of unreality interaction halfway solutions astatine $14.7 billion. The acquisition is meant to assistance Zoom ZM, +1.45% — which became a ubiquitous signifier of video connection done the pandemic — grow further into the endeavor market.

The markets

U.S. stocks look acceptable for a unsmooth time ahead: Dow industrials futures YM00, -1.28% fell adjacent 350 points portion some the S&P 500 ES00, -1.03% and Nasdaq NQ00, -0.82% were indicating a driblet astatine the open. Analysts enactment that investors are focused connected the hazard to markets from rising COVID-19 cases globally.

Equities tumbled successful Europe SXXP, -2.24% UKX, -2.26% PX1, -2.50% DAX, -2.61%, pursuing weakness successful Asian markets NIK, -1.25% HSI, -1.84% SHCOMP, -0.01%.

The chart

Chart via Wolf Street fiscal blog.

Retail income spikes caused by the pandemic person led to shortages of each kinds. Our illustration of the day, via Wolf Richter of the Wolf Street fiscal blog, shows the “catastrophic” information of inventories astatine car dealers — which earlier the pandemic made up much than one-third of each retail inventories.

Random reads

Tour de Franks: The world’s biggest bicycle contention was almost disrupted by a sausage truck stuck connected the winding roads of the Col De Romme.

Broke-chain technology: Malaysian constabulary utilized a elephantine steamroller to destruct much than 1,000 crypto plus mining rigs seized from a spot acceptable up to bargain electricity.

Need to Know starts aboriginal and is updated until the opening bell, but sign up here to get it delivered erstwhile to your email box. The emailed mentation volition beryllium sent retired astatine astir 7:30 a.m. Eastern.

Want much for the time ahead? Sign up for The Barron’s Daily, a greeting briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.

Read Entire Article