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5 Economically-Sensitive Cyclical Stocks to Buy for Big Upside

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Technology stocks have wobbled of late on the northward movement in bond yields. In fact, the tech-laden Nasdaq dropped 0.6% on Mar 12 to end at 13,319.86. Meanwhile, the 10-Year Treasury note rose 10 basis points to around 1.63% on Mar 12, as mentioned in a MarketWatch article.

Tech stocks being riskier in nature generally tend to lose their appeal when bond yields rise. Moreover, bond yields primarily rose due to optimism on coronavirus vaccine rollout and a renewed uptick in consumer outlays, indicating that the economy is now showing signs of improvement.

However, economic growth did raise inflation expectations and investors remained concerned that it would eventually compel the Fed to raise rates. No doubt, higher rates impact stocks with lofty valuations. Lest we forget, tech stocks now have relatively higher valuations as the coronavirus pandemic-led lockdown measures coerced investors to pour a lot of money into tech stocks, especially last year.

Nonetheless, the rise in bond yields failed to cap gains in the broader stock market, with the Dow and the S&P 500 finishing in the green in the last trading session. This is because even if investors dumped tech stocks, they placed their bet on cyclical stocks that were in particular affected by the coronavirus outbreak last year. After all, such economically-sensitive stocks are now well poised to gain traction, with the economy showing enough signs of progress.

The MarketWatch article further stated that analysts surveyed by them expect the U.S. economy to expand a staggering 6% this year. Additionally, as cited in a CNBC article, the Congressional Budget Office (CBO) firmly believes that U.S. GDP will bounce back to pre-pandemic levels by the middle of this year.CBO expects the real GDP to grow 3.7% in 2021.

And why not? With the vaccine rollout pace greater than ever and more government aids in the anvil, things are looking up for the economy. Needless to say, President Joe Biden signed a $1.9-trillion coronavirus relief package last week, which will stimulate the economy, provide Americans bigger checks and help struggling small businesses recoup from the losses borne due to the pandemic.

Notably, with concerns about an economic recession ebbing, cyclical stocks or consumer discretionary players’ fate has brightened. Thus, restaurant, hotel, airline, apparel, and vehicle manufacturer company shares are now bound to scale higher as their sales are projected to improve along with economic growth. At the same time, energy and financial players’ shares are cyclical in nature and are well-positioned to witness an uptick in the days ahead.

Thus, investing in some of the solid cyclical stocks whose fortunes are now expected to improve on improving economic conditions seems prudent as of now. These stocks currently flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Jack In The Box Inc. (JACK - Free Report) is a restaurant company that operates and franchises through Jack in the Box quick-service restaurants, and is one of the nation’s largest hamburger chains. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 13.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 37.2%.

Mesa Air Group, Inc. (MESA - Free Report) provides airlines services. The company offers passenger transportation and regional air services. It currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 209.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 26.9%.

L Brands, Inc. (LB - Free Report) evolved from an apparel-based specialty retailer to a segment leader focused on women’s intimate and other apparel, personal care, beauty and home fragrance products. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up25.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 15%. You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources, Inc. (EOG - Free Report) is primarily involved in exploring and producing oil and natural gas. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 106.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 217.8%.

Allegiance Bancshares, Inc. (ABTX - Free Report) operates as a bank holding company. The company offers banking products and services, primarily to small and medium-sized businesses and individual customers, through its subsidiaries. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen nearly 14% over the past 60 days. The company’s expected earnings growth rate for the current year is 24.8%.

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