November is approaching an end and positive developments on the U.S.-China trade front, better-than-expected third-quarter earnings results and healthy economic data enabled the stock market to display an uptrend. Most major indexes have hit record highs in the past month.
The S&P 500 index finished at 3,153.63 points on Nov 27, registering its third consecutive all-time high. The Dow Jones Industrial Average crossed the 28,000 mark for the first time in November and ended at 28,164.
Positive Outcome of U.S.-China Trade Tension
The protracted trade war between the United States and China finally seems to be easing at November end. Even after showing signs of progress at the start of October with hopes of a ‘phase-one’ deal, geopolitical woes, especially U.S. Congress’ bill to support protestors in Hong Kong kept trade deal uncertainties looming large.
However,Chinese administration’s action to impose penalties on violations of intellectual property rights and the United States issuing licenses to companies regarding trade with Huawei for another 90 days, kept investors’ sentiments optimistic. These have been the sticking points in the U.S.-China trade talks and both economic giants are trying to resolve the issue.
Better-Than-Expected Q3 Earnings
Third-quarter 2019 earnings results were far better than estimated, keeping the above-mentioned key benchmarks sky high in November. Despite the conspicuous global economic slowdown having dented investors’ hopes, the upbeat earnings drove the market.
Business services, utilities and transportation sectors were top performers in the reported quarter with earnings growth of 16.2%, 10.2% and 8.2%, respectively, year over year. (Read More: Weak Retail Sector Earnings)
Strong Economic Data
The gross domestic product (GDP) increased at 2.1% annualized rate in its second estimate of the third quarter, surpassing analysts’ expectation of 1.9% growth. Further, the upward revisions in inventories and investments in structures added to growth that was boosted by 2.9% growth in consumer spending.
Though the new home sales slid 0.7% in October to a 733,000-unit pace, the same came above the consensus estimate of 706,000. Additionally, the housing market received a push from lower mortgage rates, courtesy of the Federal Reserve’s three consecutive rate cuts. In fact, per data from mortgage finance agency Freddie Mac, the 30-year fixed mortgage rate currently stands at 3.7%, which is below the 4.9% peak level of last November.
All this strong economic data has been perking up stocks to record highs throughout this month.
5 Top Picks
Given the upsides in November, it is likely that the chosen Zacks Rank #1 (Strong Buy) stocks will offer good returns. More, these bets have a Momentum Score of A.You can see the complete list of today’s Zacks #1 Rank stocks here.
Communications Systems, Inc. JCS is a publicly traded company that manufactures and sells connectivity infrastructure products for broadband and voice communications globally. The company’s expected earnings growth rate for the current quarter skyrockets above 100% against the industry’s estimated earnings decline of 6.8%. The Zacks Consensus Estimate for current-year earnings has moved 93.8% north over the past 60 days.
Communications Systems has outperformed the Communication - Components industry in the past year (+206.7% versus +4.8%). The stocks have surged 60.4% over the past month compared with the S&P 500’s growth of 3.8%.
DexCom, Inc. DXCM is a publicly traded medical device company that focuses on design, development and commercialization of continuous glucose monitoring systems. The company’s expected earnings growth rate for the current year is more than 100% compared with the industry’s estimated earnings growth of 12.1%. The Zacks Consensus Estimate for current-year earnings has been revised 51.1% upward over the past 60 days.
DexCom has outperformed the Medical - Instruments industry in a year’s time (+75.1% versus +8.8%). The stocks have soared nearly 47% over the past month.
Forterra, Inc. FRTA is a publicly traded company that offers concrete drainage pipes used for storm water applications, residential and non-residential site developments, sanitary sewers, low-pressure sewer force mains, tunneled systems, treatment plant piping and utility tunnels. The company’s expected earnings growth rate for the current quarter is 59.3% against the industry’s estimated earnings decrease of 17.9%. The Zacks Consensus Estimate for current-year earnings has moved up 76.2% over the past 60 days.
Forterra has outperformed the Building Products - Concrete and Aggregates industry in a year (+116.5% versus +18.2%). The stocks have rallied 32.8% over the past 30 days.
Hibbett Sports, Inc. HIBB is a publicly traded company that engages in retailing athletic-inspired fashion products through its stores. The company’s expected earnings growth rate for the current year is 38.4% against the industry’s estimated earnings slip of 0.5%. The Zacks Consensus Estimate for current-year earnings has increased 11.4% over the past 60 days.
Hibbett Sports has outperformed the Retail – Miscellaneous industry in the past 12 months (+81.9% versus -15.2%). The stocks have risen 20.8% over a month.
Target Corporation TGT is a publicly traded general merchandise retailer that offers beauty and household essentials, food assortments, apparel, accessories, home décor products, electronics, toys, seasonal offerings and other merchandise. The company’s expected earnings growth rate for the current year is 18.4% compared with the industry’s estimated earnings growth of 9.4%. The Zacks Consensus Estimate for current-year earnings has moved up 3.7% over the past 60 days.
Target has outperformed the Retail - Discount Stores industry in the past year (+76.9% versus +35.7%). The stocks have jumped 16.4% in the past month.
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