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Three Encouraging News on U.S. Economic Recovery: 5 Top Picks

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On Nov 5, Wall Street rejoiced on three impressive news related to U.S. economic recovery. These are the October job data from the Department of Labor, a new set of data on COVID-19 vaccine and development on a government infrastructure bill.

Market participants immediately welcomed these developments. Consequently, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — ended the first week of November gaining 1.4%, 2% and 3.1%, respectively.

The robust pace of U.S. economic recovery was reconfirmed despite the pandemic, higher inflationary pressure, prolonged supply-chain disruptions and acute labor shortage. On Nov 3, Fed Chairman Jerome Powell also mentioned strong U.S. economic recovery while initiating the tapering of the central’s bank’s quantitative easing program.

Robust Job Additions in October

The U.S. economy added 571,000 jobs in October, exceeding the consensus estimate of 442,000. Moreover, September’s job additions were revised upward to 312,000 from a disappointing 194,000 reported earlier. August’s data was also revised upward to 483,000 from 366,000 reported earlier.

Total private payrolls rose 604,000 in October, partially offset by 73,000 declines in government jobs. The unemployment rate came down to 4.6% in October from 4.8% in September. The consensus estimate was 4.7%.

In October, the leisure and hospitality sector, which is directly related to the reopening of the economy added the maximum 1jobs of h64,000 — reflecting a sharp reduction in new cases of the Delta variant of coronavirus. The manufacturing sector added 60,000, doubling the consensus mark. Notably, manufacturing accounts for 12% of U.S. GDP.

Hourly wage rate dropped to 0.4% in October from 0.6% in September. However, the year-over-year, wage rate increased 4.9% in October from 4.6% in September. The average workweek fell marginally to 34.7 in October from 34.8% in September.

Good News on Covid-19 Treatment

On Nov 5, Pfizer Inc. (PFE - Free Report) reported that the clinical trial data of its COVID-19 pill when used in combination with a widely used HIV drug, reduce the risk of hospitalization or death by 89% in high-risk adults. The company will submit the data to the FDA before Thanksgiving.

Aside from Merck & Co. Inc. (MRK - Free Report) , Pfizer is the second company to demonstrate the strong effectiveness of easy-to-administer COVID-19 pills in clinical trials. In an interview with CNBC, Pfizer board member Dr. Scott Gottlieb said, “The Covid-19 pandemic could be over in the U.S. by the time President Joe Biden’s workplace vaccine mandates take effect in early January.”

Progress on Infrastructure Bill

On Nov 5, in a majority voting of 228-206, the House of Representative passed a $1.2 trillion bipartisan infrastructure bill. The bill, cleared by the Senate in August, will go to White House for President Joe Biden’s approval.

The bill includes transport, drinking-water, broadband, manufacturing and construction infrastructure developments. Segments like basic materials, industrials, telecommunications and utilities will benefit immensely with more job creation for the economy.

Our Top Picks

We have narrowed down our search to five large-cap stocks (market capital > $10 billion) that have strong growth potential for the rest of 2021. These stocks have seen positive earnings estimate revisions within the last 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Growth Score A or B. 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 three months.

Zacks Investment ResearchImage Source: Zacks Investment Research

Tesla Inc. (TSLA - Free Report) has acquired a substantial market share within the electric car segment. Increasing Model 3 delivery, which forms a major chunk of the company’s overall deliveries, is aiding its top line. Along with Model 3, Model Y is contributing to its revenues.

In addition to increasing automotive revenues, Tesla’s energy generation and storage revenues boost its earnings prospects. The automaker said that its overall deliveries surged 20% in the third quarter from its previous record in the second quarter, marking the sixth consecutive quarter-on-quarter gain.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 11.1% over the last 30 days.  

Nucor Corp. (NUE - Free Report) is a leading producer of structural steel, steel bars, steel joists, steel deck and cold-finished bars in the United States. It operates through three segments: Steel Mills, Steel Products, and Raw Materials.

The company has been seeing consistent momentum in the non-residential construction market. Demand in the non-residential construction markets was strong in the most recent quarter. Nucor’s downstream products unit has been benefiting from continued strength in the non-residential construction markets.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 7.2% over the last 30 days.

Gartner Inc. (IT - Free Report) operates as a research and advisory company in the United States, Canada, Europe, the Middle East, Africa, and internationally. It operates through three segments: Research, Conferences, and Consulting.

Gartner offers timely, thought-provoking and comprehensive analysis known for its high quality, independence and objectivity. Its research reports have become indispensable tools for various companies across different sectors, strengthening its leading position in the market. It has a large and diverse addressable market with low customer concentration that mitigates operating risks.

The company has an expected earnings growth rate of 77.7% for the current year. The Zacks Consensus Estimate for its current-year earnings improved 11% over the last 7 days.

ON Semiconductor Corp. (ON - Free Report) is seeing strengthening demand across most end markets as evident from its booking trends over the last few quarters. It has a well-diversified business generating a significant percentage of revenues from the computing, consumer, industrial, communications and automotive end markets.

ON Semiconductor continues to gain traction among electric vehicle manufacturers. It witnessed a solid demand environment in the second quarter, particularly for its power and sensing products, which it expects will continue in the near term.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings improved 12.9% over the last 7 days.

CBRE Group Inc. (CBRE - Free Report) operates as a commercial real estate services and investment company worldwide. Its performance in the recent quarters reflects the benefits from diversifying across asset type, business lines, client type and geography, plus the expansion of its resilient business in recent years.

The company is well poised to continue on its growth path in the upcoming days on the back of its wide real estate products and services offerings, healthy outsourcing business, strategic buyouts, technology investments and solid balance-sheet strength.

The company has an expected earnings growth rate of 59% for the current year. The Zacks Consensus Estimate for its current-year earnings improved 6.1% over the last 30 days.