Wall Street is northbound since the beginning of 2019 barring some fluctuations. After completing the best first half in more than two decades, all three major stock indexes -- the Dow, S&P 500 and Nasdaq Composite -- recorded their fresh all-time highs. Wall Street still has something to offer irrespective of the fact that the bull run is in its eleventh year.
Recessionary Fears Overblown
The U.S. economy is still growing albeit at a slow pace and consequently, possibility of a recession is nowhere near the current scenario. The labor market data for June is the latest example of the robustness of the domestic economy. The U.S. economy added a massive 224,000 jobs in June and 172,000 jobs per month on average in the first half of 2019.
Moreover, IHS Markit reported that U.S. manufacturing PMI rose 50.6 in June from 50.1 in May. Notably, the IHS Markit data of China, Eurozone, the U.K., Japan and Russia fell to below 50 in June, implying contraction in manufacturing activities. The Federal Reserve reported that U.S. industrial production increased by 0.4% in May, the highest in six months. Most importantly, the manufacturing sector registered growth of 0.2%, marking its first monthly gain in 2019.
Additionally, the Department of Commerce reported that core durable goods order –- a key metric to track business investment plan –- jumped 0.4% in January after witnessing a sharp fall in the previous three months. Notably, business investment in the 12 months ended May rose to 1.4% from 1.2% in April.
A Dovish Fed
A dovish stance taken by the Fed since the beginning of this year is considered as a major boost to the U.S. economy. So far, the central bank has kept its benchmark leading rate at 2.25-2.5%, and has hinted at rate cuts this year itself.
On Jun 19, in his speech following the FOMC meeting, Fed chair Jerome Powell removed the term “patient" from the minutes and added that “the FOMC will closely monitor the implications of the incoming information for economic outlook and will act as appropriate to sustain the expansion." Investors are considering a rate cut at least by 25 basis points in July and one or two more cuts the rest of this year.
Trade Negotiations Restart
On Jun 29, Presidents Trump and Xi agreed to restart trade negotiations in a meeting at the G-20 summit. Both sides have decided to hold off from imposing further tariffs for the time being. Moreover, the U.S. government has decided to ease some restrictions on Chinese telecom behemoth Huawei.
The Trump administration has decided to allow U.S. tech companies to sell products that will not harm U.S. national security to Huawei. On the other hand, China has agreed to increase the import of U.S. farm products to a considerable extent.
Consequently, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Chinese Vice Premier Liu He and Commerce Minister Zhong Shan on Jul 9. This was the first face-to-face meeting between the high-level delegations of the two countries after the trade negotiation abruptly broke down on May 5.
Our Top Picks
At this stage, it will be prudent to invest in stocks with a favorable Zacks Rank that skyrocketed in the past three months, despite severe market volatility, and are poised to beat second-quarter earnings estimates. We have narrowed down our search to five such stocks, each sporting a Zacks Rank #2 (Buy) and having a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are expected to soar close on the heels of earnings release irrespective of already solid gains in the past three months.
Canadian Pacific Railway Ltd. CP is North America's first transcontinental railway and the only transcontinental carrier with direct service to the U.S. Eastern Seaboard. Canadian Pacific has an Earnings ESP of +0.90% for the current quarter. The company has expected earnings growth of 11% for the current year. The Zacks Consensus Estimate for the current year has improved 1.2% over the last 30 days. The stock has surged 13.1% in the past three months. Canadian Pacific Railway is expected to release earnings results on Jul 16, before the opening bell.
JetBlue Airways Corp. JBLU is a low-fare, low-cost passenger airline, which provides high-quality customer service primarily on point-to-point routes. JetBlue has an Earnings ESP of +3.04% for the current quarter. The company has expected earnings growth of 24.5% for the current year. The Zacks Consensus Estimate for the current year has improved 4.9% over the last 30 days. The stock has surged 10.8% in the past three months. JetBlue Airways is expected to release earnings results on Jul 23.
MarketAxess Holdings Inc. MKTX operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide.
MarketAxess has an Earnings ESP of +7.87% for the current quarter. The company has expected earnings growth of 14.2% for the current year. The Zacks Consensus Estimate for the current year has improved 0.8% over the last 30 days. The stock has surged 33.4% in the past three months. MarketAxess Holdings is expected to release earnings results on Jul 24, before the opening bell.
Tempur Sealy International Inc. TPX is involved in the development, manufacturing and marketing of bedding products primarily in North America and internationally. It operates through two segments, North America and International.
Tempur has an Earnings ESP of +6.86% for the current quarter. The company has expected earnings growth of 14.5% for the current year. The Zacks Consensus Estimate for the current year has improved 0.3% over the last 30 days. The stock has surged 17.2% in the past three months. Tempur Sealy International is expected to release earnings results on Jul 25.
Arcosa Inc. ACA manufactures and sells infrastructure-related products and services for the construction, energy, and transportation markets. It operates through three segments: Construction Products Group, Energy Equipment Group, and Transportation Products Group.
Arcosa has an Earnings ESP of +15.22% for the current quarter. The company has expected earnings growth of 14.3% for the current year. The Zacks Consensus Estimate for the current year has improved 1.4% over the last 60 days. The stock has surged 20.3% in the past three months. Canadian Pacific Railway is expected to release earnings results on Aug 1.
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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
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