The S&P 500 finally exited correction territory on Jan 11 after five straight sessions of gain, largely boosted by investor optimism over U.S.-China trade talks this week and Federal Reserve’s recent dovish stance.
The S&P 500 rose 0.5% on Jan 11, marking a 10.4% rise from its worst December figure. Given this positive movement, it might be prudent to invest in a couple of S&P 500 stocks that are well positioned for gains ahead.
What Drove the Equity Markets?
Investor sentiment was mostly driven by the anticipation of a favorable trade deal between the United States and China as the three-day trade talks intended to resolve the trade dispute ended on Jan 10. A favorable deal could not only stop China’s decelerating economy from slowing further but also put less pressure on American corporate giants that are bearing the brunt of tariffs and encountering a significant drop in sales overseas.
In addition, Federal Reserve Chairman Jerome Powell said on Jan 10 that the Fed may lower its forecast from two interest rate hikes this year amid weakening global economy and inflation remaining largely muted. Fed’s flexible outlook on further rate hikes was welcomed by Wall Street as was evident from S&P 500’s exit from correction territory.
Positive Growth Projections for 2019
According to J.P. Morgan’s Global Market Outlook 2019 report, the fundamentals are expected to remain healthy for earnings, leverage, corporate balance sheets and investment spending. Although earnings could slow down in comparison to 2018, the investment bank expects it to be positive throughout this year.
“Based on our probability-weighted analysis of U.S.-China trade outcomes, we set our 2019 S&P 500 price target to 3,100 and earnings per share (EPS) estimate at $178,” Dubravko Lakos-Bujas, J.P. Morgan’s head of U.S. Equity Strategy, said.
Echoing J.P. Morgan’s forecasts, Bank of America Merrill Lynch has a positive financial market outlook for 2019. It expects the S&P 500 to grow a little above 3,000 points before it reaches a year-end target of 2,900. This is a 15.7% gain from last year’s closing figure of 2,506.85.
Wells Fargo and Commonwealth Financial Network also anticipate a growing curve for S&P 500 this year. While Wells Fargo expects the index to deliver a year-end figure in 2,860-2,960 range, Commonwealth Financial Network forecasts it to close between 2,900-3,000 points.
5 S&P 500 Stocks to Buy
We have hand-picked five stocks from the index that could register impressive gains in the near future. All stocks carry a Zacks Rank #1 (Strong Buy) and have a Growth Score of A or B.
Abercrombie & Fitch Company ANF is a specialty retailer that offers apparel, shoes, personal care products and accessories for men, women and children. Abercrombie & Fitch carries a Growth Score of B.
The company’s expected earnings growth rate for the current year is 44.62% compared with the Zacks Retail – Apparel and Shoes industry’s projected rise of 10.60%. The Zacks Consensus Estimate for the company’s earnings rose 3.2% in the last 30 days.You can see the complete list of today’s Zacks #1 Rank stocks here.
BlackBerry Limited BB is a technology company that offers enterprise software and services. The company has a Growth Score of B.
BlackBerry’s expected earnings growth rate for the current year is 14.29% compared with the Zacks Wireless Non-US industry’s projected rise of 5.60%. The Zacks Consensus Estimate for the company’s earnings rose 23% in the last 30 days.
Belmond Ltd. BEL operates travel and hotel businesses. The company has a Growth Score of A.
Belmond’s expected earnings growth rate for the current year is 26.67% compared with the Zacks Hotels and Motels industry’s projected rise of 13.90%. The Zacks Consensus Estimate for the company’s earnings rose 5.6% in the last 30 days.
Macro Bank Inc. BMA offers several banking products and services to individuals and corporate customers. The company has a Growth Score of B.
Macro Bank’s expected earnings growth rate for the current year is 22.89% compared with the Zacks Banks – Foreignindustry’s projected rise of 6.20%. The Zacks Consensus Estimate for the company’s earnings rose 3.6% in the last 30 days.
Ferro Corporation FOE is a specialty materials producer in the United States and abroad. The company has a Growth Score of B.
Ferro’s expected earnings growth rate for the current year is 21.79% compared with the Zacks Chemical - Specialtyindustry’s projected rise of 10%. The Zacks Consensus Estimate for the company’s earnings rose 2.1% in the last 30 days.
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