Can S&P 500 Keep Up Its Winning Momentum? Stock Picks
The S&P 500 Index, despite enduring a challenging end to the summer, has reached a milestone in resilience in half a decade. For 100 consecutive trading sessions, the benchmark for American equities has managed to avoid a decline of at least 1.5%, per a Bloomberg article, as quoted on Yahoo Finance.
Although it has logged four losses exceeding 1% in the past two months, daily fluctuations have remained notably soft, suggestive of conditions last observed in 2018. The optimism surrounding the economy's ability to withstand the Fed rate hikes led to the rally. Moreover, the Fed has been less hawkish this year due to cooling inflation. Many analysts are of the view that rates are peaking.
A few stocks that have helped the S&P 500 keep up such a winning momentum are WestRock WRK, Arista Networks ANET, EPAM Systems EPAM, Domino's Pizza DPZ and Constellation Energy Corporation CEG.
Can the Momentum Continue?
On this phenomenon, Thomas Martin, a senior portfolio manager at Globalt Investments, stated, "It's unusual, but there haven't been reasons for big drops in the stock market. Unless the Fed really surprises investors this week, there isn't going to be a reason to reposition because we know rate hikes are nearly done,” as quoted on Bloomberg.
The road ahead is mixed. The S&P 500 index has gained 16% so far this year. Economists anticipate one more rate hike before the year-end. But rates are likely to be higher for longer. Complications are likely to arise from surging oil prices, which might hit $100 by the year-end (per some analysts). This should put upward pressure on inflation and spoil all calculations of economists and the Fed.
The S&P 500's performance in September raises concerns for the rest of the month. Historical data from the Stock Trader's Almanac shows that over the past two decades, the market tends to reach its September peak around the 11th trading day, typically corresponding to a Monday. Therefore, the history for the upcoming few days doesn’t look favorable.
On the positive side, corporate earnings should act as a tailwind. There has been a notable improvement in the earnings outlook in recent months, with positive revisions for several key sectors since the start of the second quarter helping offset continued pressure on estimates for others.
Estimates for the third quarter of 2023 are holding up much better than had been the case in the comparable periods of other recent quarters, per Earnings Trends issued on Sep 13, 2023. Some recently released data points, including retail sales and jobs data, came in at decent, pointing to chances of a continued rally in the S&P 500. Plus, the holiday season is around the corner, which is normally an upbeat period for the stock market.
Stock Picks
Against this backdrop, we have highlighted a few stocks that have facilitated the S&P 500 rally in the past three months. These stocks have a Zacks Rank #1 (Strong Buy) or #2 (Buy), indicating that these stocks have further room for growth.You can see the complete list of today’s Zacks #1 Rank stocks here.
WestRock – Up 34.2%
The Zacks Rank #1 company is a multinational provider of paper and packaging solutions for consumer and corrugated packaging markets.
WestRock has the best VGM (Value-Growth-Momentum) score of “A.”
Arista Networks – Up 24.1%
The Zacks Rank #2 company is engaged in providing cloud networking solutions for data centers and cloud computing environments.
Arista Networks has a moderate VGM score of “C.”
EPAM Systems – Up 23.2%
The Zacks Rank #2 company is engaged in providing software product development services, custom application development services, application testing services, application maintenance and support services, infrastructure management services, and enterprise information management services.
EPAM Systemshas a moderate VGM score of “C.”
Domino's Pizza – Up 22.6%
The Zacks Rank #2 company delivers pizzas under the Domino’s Pizza brand. DPZ is a top player in the Quick-Service Restaurant or QSR Pizza category.
Though the company has a downbeat VGM score of “D,” its Earnings ESP is upbeat at +3.34%.
Constellation Energy – Up 21.7%
The Zacks Rank #1 company generates and markets electricity. Its operating segment consists of the Mid-Atlantic, Midwest, New York, ERCOT and other power regions.
Here, also, the stock has a poor VGM score of “D” but an upbeat Earnings ESP of +16.02%.
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Constellation Energy Corporation (CEG) : Free Stock Analysis Report
Domino's Pizza Inc (DPZ) : Free Stock Analysis Report
EPAM Systems, Inc. (EPAM) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
WestRock Company (WRK) : Free Stock Analysis Report
