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Markets Look to Pare Yearly Losses in December: Stocks to Watch

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Markets surged on Wednesday following comments from Fed Chairman Jerome Powell in a market-moving speech delivered at the Brookings Institution. Regardless of Powell’s intent, the market interpreted the speech as dovish, as he set the stage for a 50-basis point hike later this month. Price action surged in the afternoon at 1:30 p.m., which coincided the timing of Powell’s speech.

The gains accelerated after Powell noted that it made sense to “moderate” rate hikes as the Fed approaches its estimated peak in benchmark interest rates. In an overall bullish outing, information technology, communication services, and consumer discretionary were the day’s leading sectors – a swift reversal from what we’ve seen throughout the majority of the year.

Adding to the optimistic sentiment, this morning we received the latest personal consumption expenditures (PCE) data via the Commerce Department. Headline PCE was up 0.3% in October, in line with estimates. On an annual basis, October’s PCE rose 6% including food and energy, down from 6.2% in September. Core PCE, which strips out food and energy and is the Fed’s preferred gauge, rose 0.2% on the month, below the 0.3% estimate.

Building on the bullish theme, several market headwinds this year have recently reversed and now appear to be rolling over. Treasury yields have begun to fall, with the 10-year yield slipping this morning to 3.574% - the lowest level since September. In addition, the U.S. dollar has been weakening since late September and is making a series of lower lows:

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It’s been a wild ride in 2022. It may be hard to believe, but the Dow Jones Industrial Average is only about 7% away from its all-time high. And with positive seasonality underway, there’s reason to believe more upside is ahead. Dating back to 1950, no month is positive more often than December, up nearly 75% of the time. 

Let’s take a look at two stocks that are poised to continue their bullish runs amid the renewed market strength.

Belden Inc. (BDC - Free Report)

Belden, a Zacks Rank #1 (Strong Buy), is a global provider of signal transmissions solutions. BDC offers copper cable and connectivity products, fiber cable solutions, interconnect panels, and matrix switching systems for use in applications such as local area networks, data centers, 5G, fiber, and home automation. The company also provides power, cooling, and airflow management products that serve the healthcare, education, government, and real estate industries.

Belden is part of the Zacks Wire and Cable Products industry, which is currently ranked in the top 1% out of approximately 250 industries. Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. Because this group is ranked in the top half of all industries, we expect it to outperform the market over the next 3 to 6 months.

BDC has surpassed earnings estimates in each of the past four quarters, with an average surprise of 11.99% over that timeframe. BDC stock has advanced 25% this year and is currently breaking out to fresh 52-week highs.

Zacks Investment Research
Image Source: Zacks Investment Research

Futu Holdings Limited (FUTU - Free Report)

Futu Holdings operates as an online brokerage and wealth management platform in Hong Kong and internationally. FUTU offers trading, clearing, and settlement services, in addition to a wealth management service that provides access to mutual funds, private funds, bonds, and market data. The company also offers initial public offering subscription and employee share option plan solutions to corporate clients.

FUTU, a Zacks Rank #1 (Strong Buy), has witnessed a substantial increase on the earnings revision front from analysts covering the company. Looking ahead to 2023, estimates have risen 13.58% in the past 30 days to $3.43/share, reflecting potential growth 38.9% relative to this year.

Zacks Investment Research
Image Source: Zacks Investment Research

The stock appears to have bottomed out back in March, well before the major U.S. indices. Since then, FUTU shares have surged nearly 150% and are currently trading near a new 52-week high.

Make sure to keep an eye on these top-ranked stocks as we make our way into the final trading month of the year.

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