Last week was a fabulous one for Wall Street. Neither pre nor post-election uncertainties dampened market participants' sentiments. A series of solid economic data also boosted investors' confidence. Several stocks popped last week. Some of them carry a favorable Zacks Rank with more upside left. Investment in these stocks is likely to be fruitful in the near future.
Wall Street Soars in Election Week
After a five month-long astonishing rally, Wall Street suffered back-to-back declines in the last two months. All the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Compsite — tumbled 2.3%, 3.9% and 5.2%, respectively, in September and 4.6%, 2.8% and 2.3%, in October. This happened for the first time after March.
However, the market turned around aggressively in the first week of November. The Dow, the S&P 500 and the Nasdaq Composite rallied 6.9%, 7.3% and 9%, respectively, marking their best weekly performance since Apr 9. In fact, the S&P 500 recorded its best election week rally since 1932.
Sector wise, last week, technology and health care appreciated 9.7% and 8.1%, respectively. Both materials and communication services sectors advanced 7.6% while the industrial sector gained 7.2%. Notably, all 11 broad-sectors of the S&P 500 Index ended in positive territory in the election week.
Better-Than-Expected Economic and Earnings Data
Several economic data of September and October indicated that the U.S. economy is growing despite the lack of a fresh stimulus. Consumer spending — the largest driver of the U.S. GDP — rose 1.4% in September after gaining 1% in August. Personal income rose 0.9% in September after dropping 2.7% in August. In October, manufacturing PMI (purchasing managers' index), services PMI, vehicles sales, non-farm payrolls and unemployment rate came in better than expected.
The third-quarter earnings season has started on a positive note although overall earnings are likely to remain negative. As of Nov 6, total S&P 500 earnings are expected to decline 8.9% on 1.4% lower revenues. This would mean an improvement over an earnings decline of 22% year over year on 2.9% lower revenues, as projected before the reporting cycle.
This also implies a marked improvement over second-quarter earnings that plunged 32.3% on 9.2% lower revenues. Notably, the first-quarter earnings of companies on the S&P 500 Index were down 13.5% on 1.4% higher revenues. More importantly, earnings expectations for the fourth quarter are gradually improving since July.
Our Top Picks
We have narrowed down our search to five stocks that have surged more than 15% in the last week. These stocks have witnessed strong earnings estimates revisions for the current year in the last 7 days, indicating solid business prospects of these companies. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks last week.
WESCO International Inc. WCC distributes electrical, industrial, and communications maintenance, repair and operating and original equipment manufacturers products and construction materials in North America and internationally. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the last 7 days. The stock price of the Zacks Rank #2 company soared 33.4% last week.
Plantronics Inc. PLT designs, manufactures, and markets lightweight communications headsets, telephone headset systems, other communication endpoints, and accessories for the business and consumer markets under the Plantronics brand worldwide. The Zacks Consensus Estimate for the same has improved 10.3% over the last 7 days. The stock price of the Zacks Rank #1 company jumped 26.1% last week.
Clean Harbors Inc. CLH provides environmental, energy, and industrial services in North America. It operates through two segments, Environmental Services and Safety-Kleen. The Zacks Consensus Estimate for the current year has improved 42.3% over the last 7 days. The stock price of the Zacks Rank #1 company climbed 22.7% last week.
Covanta Holding Corp. CVA provides waste and energy services to municipal entities primarily in the United States and Canada. It owns and operates infrastructure for the conversion of waste to energy, as well as engages in related waste transport and disposal, and other renewable energy production businesses. The Zacks Consensus Estimate for the current year has improved 18% over the last 7 days. The stock price of the Zacks Rank #2 company rallied 17.7% last week.
Mohawk Industries Inc. MHK designs, manufactures, sources, distributes, and markets flooring products for remodeling and new construction of residential and commercial spaces in the United States, Europe, Russia, and internationally. It operates through three segments: Global Ceramic, Flooring North America and Flooring Rest of the World. The Zacks Consensus Estimate for the current year has improved 20.2% over the last 7 days. The stock price of the Zacks Rank #1 company advanced 16.9% last week.
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