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Markets have enjoyed a fruitful summer this year, powered by multiple factors. A better-expected earnings season was one of the primary contributory factors. Oil prices rebounded following favorable data and indications of an agreement on a production cap among major exporting countries. These upsides helped markets overcome jitters created by the surprise Brexit vote result and uncertainty over a rate hike. However, it became increasingly clear toward the end of summer that a near-term rate hike is in the offing.
June’sPerformance
During June, the Dow increased 0.8%, while the S&P 500 ended marginally lower and Nasdaq declined 2.1%. Investors remained cautious for most of the month over a possible exit of the U.K. from the European Union. Ultimately, the surprise result of the referendum resulted in a sluggish month for key indexes.
Moreover, Fed’s reluctance to hike rates also raised doubts about the strength of the domestic economy. May’s discouraging jobs report, a low level of business investment and lower-than-expected inflation did little to help the Fed take a rate hike call.
Other economic data was mostly encouraging in nature. Further, global crude production disruptions, a slump in U.S. crude output and decline in the domestic commercial crude oil inventories had a positive impact on oil prices. (Read: 5 Best Top-Ranked Stocks of June)
July’sPerformance
Benchmarks registered a considerably stronger performance in July. Over last month, the S&P 500, the Dow and the Nasdaq gained 3.6%, 2.8% and 6.6%, respectively. Markets rebounded from the steep losses it suffered on Brexit woes, with U.S. stocks climbing to record highs.
Corporate results came in better than expected, while reassuring domestic economic data raised confidence in the strength of the economy. Several major companies posted upbeat earnings results during the second quarter earnings season, with banks leading the pack.
Stocks also surged on stimulus hopes from central banks around the world to counter economic gloom. The Bank of England said that most of its members are expecting a loosening of policy in August. This reassured investors who were expecting further stimulus measures to stem the rot of an already reeling economy. (Read: 5 Best Top Ranked Stocks of July)
Oil Price Gains Continue
In August, oil prices continued to move northward. During the first week, oil prices gained following a surprisingly large draw on gasoline stockpiles. However, some of these gains were curtailed on oversupply concerns, subdued demand and increased crude inventories.
Rise in oil prices helped benchmarks finish in the green for the second week. Saudi Arabia’s Energy Minister Kahlid al-Falih showed willingness to talk with major crude-oil producers to limit oil production, which eventually boosted oil prices. WTI crude posted its largest weekly gain in about four months.
During the third week, crude hit a one-month high. However, during the fourth week, analysts at Morgan Stanley (MS - Free Report) said that any agreement between major oil producing nations to freeze crude production is "highly unlikely", leading to a decline in crude prices. Disappointing inventories data also weighed on crude prices.
Mixed Economic Data
Economic data released this month was largely mixed in nature. Personal consumption expenditure increased in June. Meanwhile, ISM Manufacturing and Services Indexes declined in July and factory orders declined for the second straight month in June.
Also, construction spending was down for third consecutive month and initial claims increased to its highest level since end-June. However, rise in industrial output and home building was encouraging.
The biggest economic release for the month, second quarter GDP data, was a disappointment. The “second” estimate by the Bureau of Economic Analysis showed that GDP grew at 1.1% in the second quarter, lower than the initial estimate of 1.2%.
Rate Hike on the Anvil?
Fed’s July meeting minutes showed that some policymakers argued that a rate hike should take place soon as the labor market was nearing full employment. However, the majority agreed that more positive data is required to initiate such a move.
Additionally, comments from some Fed officials raised speculation of a rate hike in the near term. Kansas City Fed President Esther George said that after observing the job market, inflation and Fed’s forecast for the same, she considers “that it would be appropriate” to raise rates gradually.
Further, Dallas Fed President Robert Kaplan said that levels of inflation and employment are improving and “GDP growth in the second half of the year will be strong." He added that following “very good, healthy financial conditions,” it would be appropriate to raise rates.
Speaking at the Jackson Hole economic symposium, Fed Chair Janet Yellen said that the case for hiking federal funds rate has gained in strength in “recent months.” Yellen asserted that the case for a rate increase is gathering steam, thanks to a solid labor market and positive outlook on economic activity and inflation. Fed Vice-chairman Stanley Fisher also advocated a rate hike in the near term. Financial stocks have gained recently due to these developments.
5 Star Performers
I ran a screen on Research Wizard for companies with the following parameters:
Here are the top 5 stocks that made it through this screen:
America's Car-Mart Inc. (CRMT - Free Report) operates automotive dealerships and is one of the largest automotive retailers in the U.S. focused exclusively on the Buy Here/Pay Here segment of the used car market.
Price gain over the last 12 weeks = 68.3% Expected earnings growth for current year = 67.3%
America's Car-Mart has a Zacks Rank #1 (Strong Buy. The stock’s forward price-to-earnings ratio (P/E) for the current financial year (F1) is 14.09x.
PCM, Inc. is a technology solutions provider to businesses, government and educational institutions and individual consumers.
Price gain over the last 12 weeks = 68%
PCM holds a Zacks Rank #1 and it has a P/E (F1) of 11.80x.Its expected earnings growth over the current year is more than 100%.
Aegean Marine Petroleum Network Inc. is a marine fuel logistics company that physically supplies and markets refined marine fuel and lubricants to ships in port and at sea.
Price gain over the last 12 weeks = 66.4% Expected earnings growth for current year = 39.3%
Apart from a Zacks Rank #1, Aegean Marine Petroleum has a P/E (F1) of 8.42x.
Willdan Group, Inc. (WLDN - Free Report) is a leading single resource provider of specialized outsourced services to small and mid-sized public agencies located primarily in California and other western states.
Price gain over the last 12 weeks = 61.2% Expected earnings growth for current year = 63.5%
Willdan Group holds a Zacks Rank #2 (Buy) and it has a P/E (F1) of 19.54x.
Horizon Global Corporation is a designer, manufacturer and distributor of towing, trailering, cargo management and accessory products for original equipment, aftermarket and retail customers.
Price gain over the last 4 weeks = 53.7% Expected earnings growth for current year = 21.5%
Horizon Global holds a Zacks Rank #1 and it has a P/E (F1) of 16.52x.
Will Fall Be Kind to Stocks?
All three benchmarks gained in excess of 4% during the last three months. Apart from the lean period in June, stocks have largely refuted the old adage of staying away from the bourses from May. A better-than-expected earnings season and a resurgence in oil prices is largely responsible for the gains during this period. Meanwhile, markets have largely come to terms with the prospect of a rate hike. With the economy expected to bounce back during the current quarter, stocks are likely to move higher in the months ahead.
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>
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5 Best Performing Stocks of Summer
Markets have enjoyed a fruitful summer this year, powered by multiple factors. A better-expected earnings season was one of the primary contributory factors. Oil prices rebounded following favorable data and indications of an agreement on a production cap among major exporting countries. These upsides helped markets overcome jitters created by the surprise Brexit vote result and uncertainty over a rate hike. However, it became increasingly clear toward the end of summer that a near-term rate hike is in the offing.
June’s Performance
During June, the Dow increased 0.8%, while the S&P 500 ended marginally lower and Nasdaq declined 2.1%. Investors remained cautious for most of the month over a possible exit of the U.K. from the European Union. Ultimately, the surprise result of the referendum resulted in a sluggish month for key indexes.
Moreover, Fed’s reluctance to hike rates also raised doubts about the strength of the domestic economy. May’s discouraging jobs report, a low level of business investment and lower-than-expected inflation did little to help the Fed take a rate hike call.
Other economic data was mostly encouraging in nature. Further, global crude production disruptions, a slump in U.S. crude output and decline in the domestic commercial crude oil inventories had a positive impact on oil prices. (Read: 5 Best Top-Ranked Stocks of June)
July’s Performance
Benchmarks registered a considerably stronger performance in July. Over last month, the S&P 500, the Dow and the Nasdaq gained 3.6%, 2.8% and 6.6%, respectively. Markets rebounded from the steep losses it suffered on Brexit woes, with U.S. stocks climbing to record highs.
Corporate results came in better than expected, while reassuring domestic economic data raised confidence in the strength of the economy. Several major companies posted upbeat earnings results during the second quarter earnings season, with banks leading the pack.
Stocks also surged on stimulus hopes from central banks around the world to counter economic gloom. The Bank of England said that most of its members are expecting a loosening of policy in August. This reassured investors who were expecting further stimulus measures to stem the rot of an already reeling economy. (Read: 5 Best Top Ranked Stocks of July)
Oil Price Gains Continue
In August, oil prices continued to move northward. During the first week, oil prices gained following a surprisingly large draw on gasoline stockpiles. However, some of these gains were curtailed on oversupply concerns, subdued demand and increased crude inventories.
Rise in oil prices helped benchmarks finish in the green for the second week. Saudi Arabia’s Energy Minister Kahlid al-Falih showed willingness to talk with major crude-oil producers to limit oil production, which eventually boosted oil prices. WTI crude posted its largest weekly gain in about four months.
During the third week, crude hit a one-month high. However, during the fourth week, analysts at Morgan Stanley (MS - Free Report) said that any agreement between major oil producing nations to freeze crude production is "highly unlikely", leading to a decline in crude prices. Disappointing inventories data also weighed on crude prices.
Mixed Economic Data
Economic data released this month was largely mixed in nature. Personal consumption expenditure increased in June. Meanwhile, ISM Manufacturing and Services Indexes declined in July and factory orders declined for the second straight month in June.
Also, construction spending was down for third consecutive month and initial claims increased to its highest level since end-June. However, rise in industrial output and home building was encouraging.
The biggest economic release for the month, second quarter GDP data, was a disappointment. The “second” estimate by the Bureau of Economic Analysis showed that GDP grew at 1.1% in the second quarter, lower than the initial estimate of 1.2%.
Rate Hike on the Anvil?
Fed’s July meeting minutes showed that some policymakers argued that a rate hike should take place soon as the labor market was nearing full employment. However, the majority agreed that more positive data is required to initiate such a move.
Additionally, comments from some Fed officials raised speculation of a rate hike in the near term. Kansas City Fed President Esther George said that after observing the job market, inflation and Fed’s forecast for the same, she considers “that it would be appropriate” to raise rates gradually.
Further, Dallas Fed President Robert Kaplan said that levels of inflation and employment are improving and “GDP growth in the second half of the year will be strong." He added that following “very good, healthy financial conditions,” it would be appropriate to raise rates.
Speaking at the Jackson Hole economic symposium, Fed Chair Janet Yellen said that the case for hiking federal funds rate has gained in strength in “recent months.” Yellen asserted that the case for a rate increase is gathering steam, thanks to a solid labor market and positive outlook on economic activity and inflation. Fed Vice-chairman Stanley Fisher also advocated a rate hike in the near term. Financial stocks have gained recently due to these developments.
5 Star Performers
I ran a screen on Research Wizard for companies with the following parameters:
(Click here to sign up for a free trial to the Research Wizard today):
(See the performance of Zacks’ portfolios and strategies here: About Zacks Performance).
Here are the top 5 stocks that made it through this screen:
America's Car-Mart Inc. (CRMT - Free Report) operates automotive dealerships and is one of the largest automotive retailers in the U.S. focused exclusively on the Buy Here/Pay Here segment of the used car market.
Price gain over the last 12 weeks = 68.3%
Expected earnings growth for current year = 67.3%
America's Car-Mart has a Zacks Rank #1 (Strong Buy. The stock’s forward price-to-earnings ratio (P/E) for the current financial year (F1) is 14.09x.
PCM, Inc. is a technology solutions provider to businesses, government and educational institutions and individual consumers.
Price gain over the last 12 weeks = 68%
PCM holds a Zacks Rank #1 and it has a P/E (F1) of 11.80x.Its expected earnings growth over the current year is more than 100%.
Aegean Marine Petroleum Network Inc. is a marine fuel logistics company that physically supplies and markets refined marine fuel and lubricants to ships in port and at sea.
Price gain over the last 12 weeks = 66.4%
Expected earnings growth for current year = 39.3%
Apart from a Zacks Rank #1, Aegean Marine Petroleum has a P/E (F1) of 8.42x.
Willdan Group, Inc. (WLDN - Free Report) is a leading single resource provider of specialized outsourced services to small and mid-sized public agencies located primarily in California and other western states.
Price gain over the last 12 weeks = 61.2%
Expected earnings growth for current year = 63.5%
Willdan Group holds a Zacks Rank #2 (Buy) and it has a P/E (F1) of 19.54x.
Horizon Global Corporation is a designer, manufacturer and distributor of towing, trailering, cargo management and accessory products for original equipment, aftermarket and retail customers.
Price gain over the last 4 weeks = 53.7%
Expected earnings growth for current year = 21.5%
Horizon Global holds a Zacks Rank #1 and it has a P/E (F1) of 16.52x.
Will Fall Be Kind to Stocks?
All three benchmarks gained in excess of 4% during the last three months. Apart from the lean period in June, stocks have largely refuted the old adage of staying away from the bourses from May. A better-than-expected earnings season and a resurgence in oil prices is largely responsible for the gains during this period. Meanwhile, markets have largely come to terms with the prospect of a rate hike. With the economy expected to bounce back during the current quarter, stocks are likely to move higher in the months ahead.
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>