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US Consumers Most Confident in 17 Years: Top 4 Picks
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Optimism surrounding the U.S. economy rose in February, per the latest reading of the consumer confidence index. It seems consumers are no longer fretting over Federal Reserve Chairman Jerome Powell’s comments that the central bank will continue to raise interest rates gradually. The Americans are rather focused on record-low unemployment levels and better-than-expected job addition.
Americans filing for unemployment benefits plunged to a 45-year low recently, indicating strong job growth. Job additions rose at a steady pace in January, and the record low unemployment rate and strong wage growth show that the labor market is in good shape.
The tax bill, which was signed into law last year, also instilled confidence in Americans. Market pundits believe that the tax cut will boost wages as companies will use that extra money to give workers a raise.
Confidence in American Economy Highest in 17 Years
The attitude of consumers on present and short-term business prospects as measured by The Conference Board stands at 130.80 in February, much higher than January’s 124.30. Most of the economists, served by MarketWatch, projected the index at 127.3.
The key economic indicator touched its highest mark since November 2000. In other words, consumers are more optimistic about the short-term economic scenarios.
Factors Driving the Index
The Conference Board, a non-profit research entity, believes that the positive outlook for the labor market primarily backed the confidence in consumers. This clearly shows that consumers are more upbeat about low unemployment, wage growth and solid GDP data than market turbulence.
Significant Job Addition & Low Unemployment: Per the U.S. Labor Department report, 200,000 new non-farm payroll jobs were created in January, beating market expectations. According to a survey by Reuters, most economists were expecting an addition of 180,000 jobs.
Also, the jobless rate remained at an ultra-low level of 4.1% and workers’ hourly wages increased 2.9% year over year in January 2017.
Jobless Claims Tank to Lowest in 45 Years: Jobless claims fell by 7,000 to 222,000 in the week ending Feb 17. This marked the second-lowest level since the end of Great Recession of 2007-09. In fact, the four-week moving average that evens out sharp fluctuations in weekly reports declined by 2,250 to 226,000.
GDP Data Solid: The nation’s GDP increased at a seasonally adjusted annual rate of 2.6% in the final three months of 2017, following gains in the previous two quarters of more than 3%, per the “advance” estimate released by the Bureau of Economic Analysis. In fact, this marked the economy’s strongest stretch of growth since the expansion started in mid-2009.
Notably, in the first quarter of this year, GDP is expected to jump 5.4%, per the latest estimate by Atlanta Fed.
Why Does Consumer Confidence Matter?
Such a record consumer confidence number is a significant reading since it has been, historically, good at predicting consumer spending for the next three to six months. The more confidence households have, the more they will spend. Notably, consumer spending accounts for roughly 70% of the U.S. economy, which isn’t a petty number.
These numbers influence companies’ production schedule, particularly big-ticket items like cars, appliances, etc. In fact, the consumer discretionary sector is mostly affected as spending plays a major role in determining revenues. Automobile stocks often track these numbers and so do appliance manufacturers, retailers, consumer discretionary manufacturers, big-ticket entertainment providers, jewelry retailers and cruise line operators, to name a few.
Stocks in Focus
Since the aforementioned sector is positioned to benefit from this stellar reading on confidence level, picking stocks from the same will be a smart move. We have, thus, selected four consumer discretionary stocks which flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also boast of a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Headquartered in Tokyo, Japan, Sony Corporation is the leading designer of electronic equipment. Over the past two years, Sony has been taking concerted efforts to attain a leaner organizational structure to augment growth. The company announced a number of changes in its internal administration.
Based in New York, Time Warner Inc. is a leading media and entertainment player. We believe the company’s initiatives, such as foray into new markets, strategic investments and digital endeavors should help it maintain its upbeat performance.
The earnings surprise history of Time Warner is impressive as the firm surpassed the Zacks Consensus Estimate in all the prior four quarters. Time Warner carries a Zacks Rank #2 and a VGM Score of A.
Columbia Sportswear Company (COLM - Free Report) , headquartered in Portland, Oregon, is primarily involved in designing and supplying lifestyle apparel. The company has been gaining from the steady progress in its European wholesale and U.S. direct-to-consumer businesses.
The Zacks #2 Ranked firm surpassed the Zacks Consensus Estimate in all the prior four quarters. It has a VGM Score of A.
Based in Rockford, MI, Wolverine World Wide, Inc. (WWW - Free Report) is also a leading designer of footwear. The company beat the Zacks Consensus Estimate in three of the prior four quarters, the average positive earnings surprise being 21%.
We expect this #2 Ranked firm to witness earnings growth of 23.2% in the current year. Wolverine World has a VGM Score of A.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
US Consumers Most Confident in 17 Years: Top 4 Picks
Optimism surrounding the U.S. economy rose in February, per the latest reading of the consumer confidence index. It seems consumers are no longer fretting over Federal Reserve Chairman Jerome Powell’s comments that the central bank will continue to raise interest rates gradually. The Americans are rather focused on record-low unemployment levels and better-than-expected job addition.
Americans filing for unemployment benefits plunged to a 45-year low recently, indicating strong job growth. Job additions rose at a steady pace in January, and the record low unemployment rate and strong wage growth show that the labor market is in good shape.
The tax bill, which was signed into law last year, also instilled confidence in Americans. Market pundits believe that the tax cut will boost wages as companies will use that extra money to give workers a raise.
Confidence in American Economy Highest in 17 Years
The attitude of consumers on present and short-term business prospects as measured by The Conference Board stands at 130.80 in February, much higher than January’s 124.30. Most of the economists, served by MarketWatch, projected the index at 127.3.
The key economic indicator touched its highest mark since November 2000. In other words, consumers are more optimistic about the short-term economic scenarios.
Factors Driving the Index
The Conference Board, a non-profit research entity, believes that the positive outlook for the labor market primarily backed the confidence in consumers. This clearly shows that consumers are more upbeat about low unemployment, wage growth and solid GDP data than market turbulence.
Significant Job Addition & Low Unemployment: Per the U.S. Labor Department report, 200,000 new non-farm payroll jobs were created in January, beating market expectations. According to a survey by Reuters, most economists were expecting an addition of 180,000 jobs.
Also, the jobless rate remained at an ultra-low level of 4.1% and workers’ hourly wages increased 2.9% year over year in January 2017.
Jobless Claims Tank to Lowest in 45 Years: Jobless claims fell by 7,000 to 222,000 in the week ending Feb 17. This marked the second-lowest level since the end of Great Recession of 2007-09. In fact, the four-week moving average that evens out sharp fluctuations in weekly reports declined by 2,250 to 226,000.
GDP Data Solid: The nation’s GDP increased at a seasonally adjusted annual rate of 2.6% in the final three months of 2017, following gains in the previous two quarters of more than 3%, per the “advance” estimate released by the Bureau of Economic Analysis. In fact, this marked the economy’s strongest stretch of growth since the expansion started in mid-2009.
Notably, in the first quarter of this year, GDP is expected to jump 5.4%, per the latest estimate by Atlanta Fed.
Why Does Consumer Confidence Matter?
Such a record consumer confidence number is a significant reading since it has been, historically, good at predicting consumer spending for the next three to six months. The more confidence households have, the more they will spend. Notably, consumer spending accounts for roughly 70% of the U.S. economy, which isn’t a petty number.
These numbers influence companies’ production schedule, particularly big-ticket items like cars, appliances, etc. In fact, the consumer discretionary sector is mostly affected as spending plays a major role in determining revenues. Automobile stocks often track these numbers and so do appliance manufacturers, retailers, consumer discretionary manufacturers, big-ticket entertainment providers, jewelry retailers and cruise line operators, to name a few.
Stocks in Focus
Since the aforementioned sector is positioned to benefit from this stellar reading on confidence level, picking stocks from the same will be a smart move. We have, thus, selected four consumer discretionary stocks which flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also boast of a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Headquartered in Tokyo, Japan, Sony Corporation is the leading designer of electronic equipment. Over the past two years, Sony has been taking concerted efforts to attain a leaner organizational structure to augment growth. The company announced a number of changes in its internal administration.
Sony managed to beat the Zacks Consensus Estimate in each of the prior four quarters. The company has a Zacks Rank #1 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Based in New York, Time Warner Inc. is a leading media and entertainment player. We believe the company’s initiatives, such as foray into new markets, strategic investments and digital endeavors should help it maintain its upbeat performance.
The earnings surprise history of Time Warner is impressive as the firm surpassed the Zacks Consensus Estimate in all the prior four quarters. Time Warner carries a Zacks Rank #2 and a VGM Score of A.
Columbia Sportswear Company (COLM - Free Report) , headquartered in Portland, Oregon, is primarily involved in designing and supplying lifestyle apparel. The company has been gaining from the steady progress in its European wholesale and U.S. direct-to-consumer businesses.
The Zacks #2 Ranked firm surpassed the Zacks Consensus Estimate in all the prior four quarters. It has a VGM Score of A.
Based in Rockford, MI, Wolverine World Wide, Inc. (WWW - Free Report) is also a leading designer of footwear. The company beat the Zacks Consensus Estimate in three of the prior four quarters, the average positive earnings surprise being 21%.
We expect this #2 Ranked firm to witness earnings growth of 23.2% in the current year. Wolverine World has a VGM Score of A.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>