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5 Top Growth Stocks to Buy as Fed Soothes Inflation Fears

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June’s inflation data for the United States topped estimates and indicated a rise in the cost of living as the economy reopened from the coronavirus pandemic. Prices of goods and services in the United States soared in June as consumer demand picked up, thanks to improvement in the public health crisis, closure of business restrictions, government stimulus measures and an increase in household savings.

Citing a Wall Street Journal article, the Labor Department’s consumer price index (CPI) jumped 5.4% from the year-ago period, the fastest 12-month climb in more than a decade. The core CPI that excludes volatile categories including food and energy also remains elevated. From a massive jump in prices of used cars and trucks, an uptick in airfares to rise in prices of hotels and restaurants, all contributed toward the higher cost of living.

While June’s CPI came in hotter than expected, the producer price index (PPI) surpassed expectations. The PPI advanced 1% in June from May and surged 7.3% on a year-over-year basis, quoting a CNBC article. Naturally, as wholesale as well as consumer prices moved up at a faster-than-anticipated pace, investors were worried. After all, a rise in inflation results in an increase in bond yields, thereby adversely impacting growth-oriented stocks.

Fed Chair Jerome Powell, however, recently conveyed to Congress that inflation somewhat will moderate and that the central bank intends to continue its present monetary policy to pep up the economy. Fed’s belief that inflation is transitory did boost stocks on Jul 14, with major indexes like the Dow and the S&P 500 closing in the green.

Powell noted that the present rise in inflation will partially reverse in the near term as the adverse impact of supply constraints due to the pandemic will eventually ebb. Critics, however, opined that the Fed’s move to keep interest rates near zero while continuing to purchase mortgage-backed securities every month is primarily responsible for the uptick in inflation. Yet, Powell stressed that the increase in prices of essential goods and services will be temporary.

Meanwhile, some opined that the reopening of the economy leading to a recovery in the labor market has heated up inflation. After all, an encouraging 850,000 new jobs were added to the U.S. economy in the month of June, per the Labor Department, citing a nytimes article. But Powell believes that even if the jobs market has started to show signs of progress, it still has miles to go before complete recovery from the coronavirus-led hammering it took last year.

Nonetheless, the Fed’s persistence with accommodative monetary policy for the time being and belief that inflation is in a transitory phase buoyed investors’ sentiments and increased the allure of growth stocks. This calls for investing in some of the best-rated growth stocks for better returns in the near future. These stocks also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Score of A or B.

Apple Inc. AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories. The company currently has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 1.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 57.9%.

Advanced Micro Devices, Inc. AMD has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focus company from a pure-bred consumer-PC chip provider. The company currently has a Zacks Rank #2 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 0.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 68.2%.

BuildABear Workshop, Inc BBW is the leading and only national company providing a make-your-own stuffed animal interactive retail-entertainment experience. The company currently has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 181.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 190.3%.

Burlington Stores, Inc. BURL operates as a retailer of branded apparel products in the United States. The company currently has a Zacks Rank #1 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 20.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 438.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conns, Inc. CONN is a specialty retailer currently operating retail locations in Texas and Louisiana. The company currently has a Zacks Rank #1 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 79.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 4,766.67%.


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