If the adage "morning shows the day" holds any truth, then September is likely to spring a pleasant surprise for the investing communities. Historically, September is the worst-performing month in Wall Street. However, this year, market participants are wondering whether the jinx can break to ensure Wall Street's rally of six months in a row, defying coronavirus.
Notably, after rallying for five consecutive months, Wall Street closed the first trading day of September on a positive note. All the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — advanced 0.8%, 0.8% and 1.1%, respectively. The small-cap specific Russell 2000 gained 1.1% and the mid-cap centric S&P 400 rose 0.8%.
At this stage, it will be prudent to invest in Zacks top-ranked momentum stocks that have surged nearly 15% or more in the past month, to tap the market's rally.
Momentum Likely to Continue Despite Pandemic
Momentum investing calls for a continued appraisal of stocks, ensuring that an investor does not pick a beaten-down name or overlook a thriving one. Momentum investors buy high on the anticipation that a stock will only ascend in the short to intermediate term. Although coronavirus-induced woes are persisting in the United States, causing occasional market fluctuations, the overall movement of Wall Street is likely to remain northbound.
On Aug 28, Reuters reported that President Donald Trump is willing to sign a $1.3 trillion coronavirus relief bill. On Sep 1, White House Chief of Staff Mark Meadows said that the White House and Senate Republicans are likely to introduce the new bill next week.
On Sep 1, in a major development, the Trump administration issued an eviction moratorium. Through the moratorium, the Centers for Disease Control and Prevention will invoke its authority to halt evictions through the end of the year in an effort to slow the spread of the pandemic.
This will stop nearly 40 million U.S. renters from being thrown out of their rental homes. These people are unable to pay rent due to coronavirus-induced job losses. Moreover, the termination of the paycheck protection program in July has made the situation worse.
Fed's New Inflation Control Policy
On Aug 27, Fed Chairman Jerome Powell announced that the newly adopted "average inflation targeting" policy will allow inflation and employment to run higher together for some time in order to support the pandemic-ravaged economy.
The Fed's target of 2% inflation will remain unchanged. However, under the new policy, the inflation rate will remain higher than 2% along with increased employment for some time. This inherently means that the benchmark interest rate, which is currently low in the 0-0.25% range, will remain at that level for a longer period than expected.
Moreover, Powell has changed the Fed's approach toward employment. Under the new approach, the jobs situation will be described by the Fed’s “assessments of the shortfalls of employment from its maximum level” rather than “deviations from the maximum level'' followed earlier.
Our Top Picks
We have narrowed down our search to five momentum stocks that have popped in the past month. All these stocks witnessed robust earnings revisions in the last 7 to 30 days and have strong growth potential. Each of our picks carries a Zacks Rank #1 (Strong Buy) and a Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Dycom Industries Inc. (DY - Free Report) is a specialty contracting firm operating in the telecom industry, providing diverse services such as engineering, construction, maintenance and installation services for the cable and telephone companies.
The company has an expected earnings growth rate of 16.7% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved by 29.3% over the last 7 days. The stock price has rallied 47.1% in the past month.
Aspen Technology Inc. (AZPN - Free Report) provides asset optimization solutions in the United States, Europe, the Asia Pacific, Canada, Latin America and the Middle East. The company operates through two segments, Subscription and Software.
The company has an expected earnings growth rate of 36.8% for the current year (ending June 2021). The Zacks Consensus Estimate for current-year earnings has improved by 5.4% over the last 7 days. The stock price has soared 32.9% in the past month.
TTEC Holdings Inc. (TTEC - Free Report) is focused on the design, implementation, and delivery of transformative customer experience for various brands. It operates through TTEC Digital and TTEC Engage segments.
The company has an expected earnings growth rate of 27.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 18.1% over the last 30 days. The stock has jumped 19.5% in the past month.
Generac Holdings Inc. (GNRC - Free Report) designs, manufactures, and sells power generation equipment, energy storage systems, and other power products for the residential and light commercial and industrial markets worldwide.
The company has an expected earnings growth rate of 13.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 1.1% over the last 7 days. The stock price has climbed 18.8% in the past month.
Sykes Enterprises Inc. (SYKE - Free Report) is a global business process outsourcing leader in providing comprehensive inbound customer engagement services primarily in the communications, financial services, healthcare, technology, transportation and retail industries.
The company has an expected earnings growth rate of 11.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 45.7% over the last 30 days. The stock price has surged 14.8% in the past month.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>