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Hot Inflation Won't Deter Year-End Wall Street Rally: 3 Picks
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Consumers in the United States have been spending a lot more on non-durable goods this year than they did in 2020. However, the threat of inflation doesn’t seem to dissipate, which in turn may hurt consumer spending and disrupt economic growth. No doubt, inflation shouldn’t be beneficial for growth-oriented stocks since it impacts their cash flows.
But such stocks shrugged off rising inflationary pressure and are now poised to scale further north in the near term. This is because encouraging third-quarter earnings results, a strong labor market, and the House passing Biden’s infrastructure plan gave the broader stock market the wherewithal to move higher. Thus, at the moment, investing in growth-oriented stocks like AutoNation, Inc. (AN - Free Report) , Costco Wholesale Corporation (COST - Free Report) and Tesla, Inc. (TSLA - Free Report) seems prudent.
Biggest Surge in Inflation in 30 Years
The consumer price index (CPI), which mostly includes products ranging from groceries to health care to gasoline, soared 6.2% in October on a year-over-year basis, an almost 31-year high, stated the Labor Department, as mentioned in a CNBC article. The article further noted that CPI increased 0.9% month-over-month in October. In fact, fuel prices, energy prices, food prices, to even used vehicle prices witnessed an uptick in October.
So, what led to the price spikes? Last year, businesses were shut down, and the economy was almost on the brink of collapse due to the coronavirus outbreak. However, Fed’s accommodative monetary policy and the government’s stimulus measures helped the economy chug along, with consumer demand picking up. But businesses had to struggle to meet such demand. They faced labor shortages and supply-chain disruptions, leading to higher costs. And such higher costs are now passed on to consumers in the form of bumped-up prices.
Rise in Inflation Isn’t Hampering Bullish Sentiments
Stock market investors, in reality, aren’t rattled by the relentless rise in the prices of goods and services. This is because companies performed beyond expectations in the third quarter. Earnings results were encouraging despite headwinds such as slow economic growth in China and supply-chain disturbances. Out of the 445 S&P 500 companies that have reported third-quarter results so far, earnings are up 42.9% from the same period a year ago (read more: Are Earnings Estimates Going Down?).
Strong labor market conditions and the House passing the bipartisan infrastructure bill also bolstered investors’ sentiment. With pandemic-related concerns easing, employers have started to offer new jobs. In October, 531,000 new jobs were added in the United States, while the unemployment rate dropped to 4.6%, a tell-tale sign that the economy is chugging along, citing a financial times article. At the same time, the long-awaited bipartisan infrastructure bill got passed by the House of Representatives on Nov 5 -- something that will boost the economy in the long run (read more: 3 Big Winners as House Passes $1.2T US Infrastructure Bill).
3 Solid Growth Stocks to Buy Now
With the promising third-quarter earnings, better labor market conditions and the passing of the infrastructure bill by the House overshadowing inflation concerns, things are looking up for the stock market. Hence, it’s judicious to invest in the above-mentioned stocks that currently possess a Zacks Rank #1 (Strong Buy) and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
AutoNation is the largest automotive retailer in the United States. Its several sources of income as well as its diversified product mix are expected to boost bottom-line growth in the near future.
AutoNation’s initiative to expand stores is also praiseworthy. The Zacks Consensus Estimate for its current-year earnings has moved up 16.4% over the past 60 days. AutoNation’s expected earnings growth rate for the current year is a superb 142.6%.
Costco Wholesale sells high volumes of foods and general merchandise at discounted prices through membership warehouses. Costco Wholesale’s initiative to penetrate the e-commerce business has paid off well. Better price management and growth strategies also bode well for Costco Wholesale.
The Zacks Consensus Estimate for its current-year earnings has moved up 5% over the past 60 days. Costco Wholesale’s expected earnings growth rate for the current year is a steady 9.7%.
Tesla has evolved into a dynamic technology innovator. It recently became the second-fastest company to join the elite $1T club. The global demand to reduce carbon emissions has increased the requirement for electric vehicles -- something that suites Tesla well (read more: Tesla is a Screaming Buy as It Joins the Elite $1T Club).
The Zacks Consensus Estimate for its current-year earnings has moved up 16.8% over the past 60 days. Tesla’s expected earnings growth rate for the current year is a solid 166.5%.
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Hot Inflation Won't Deter Year-End Wall Street Rally: 3 Picks
Consumers in the United States have been spending a lot more on non-durable goods this year than they did in 2020. However, the threat of inflation doesn’t seem to dissipate, which in turn may hurt consumer spending and disrupt economic growth. No doubt, inflation shouldn’t be beneficial for growth-oriented stocks since it impacts their cash flows.
But such stocks shrugged off rising inflationary pressure and are now poised to scale further north in the near term. This is because encouraging third-quarter earnings results, a strong labor market, and the House passing Biden’s infrastructure plan gave the broader stock market the wherewithal to move higher. Thus, at the moment, investing in growth-oriented stocks like AutoNation, Inc. (AN - Free Report) , Costco Wholesale Corporation (COST - Free Report) and Tesla, Inc. (TSLA - Free Report) seems prudent.
Biggest Surge in Inflation in 30 Years
The consumer price index (CPI), which mostly includes products ranging from groceries to health care to gasoline, soared 6.2% in October on a year-over-year basis, an almost 31-year high, stated the Labor Department, as mentioned in a CNBC article. The article further noted that CPI increased 0.9% month-over-month in October. In fact, fuel prices, energy prices, food prices, to even used vehicle prices witnessed an uptick in October.
So, what led to the price spikes? Last year, businesses were shut down, and the economy was almost on the brink of collapse due to the coronavirus outbreak. However, Fed’s accommodative monetary policy and the government’s stimulus measures helped the economy chug along, with consumer demand picking up. But businesses had to struggle to meet such demand. They faced labor shortages and supply-chain disruptions, leading to higher costs. And such higher costs are now passed on to consumers in the form of bumped-up prices.
Rise in Inflation Isn’t Hampering Bullish Sentiments
Stock market investors, in reality, aren’t rattled by the relentless rise in the prices of goods and services. This is because companies performed beyond expectations in the third quarter. Earnings results were encouraging despite headwinds such as slow economic growth in China and supply-chain disturbances. Out of the 445 S&P 500 companies that have reported third-quarter results so far, earnings are up 42.9% from the same period a year ago (read more: Are Earnings Estimates Going Down?).
Strong labor market conditions and the House passing the bipartisan infrastructure bill also bolstered investors’ sentiment. With pandemic-related concerns easing, employers have started to offer new jobs. In October, 531,000 new jobs were added in the United States, while the unemployment rate dropped to 4.6%, a tell-tale sign that the economy is chugging along, citing a financial times article. At the same time, the long-awaited bipartisan infrastructure bill got passed by the House of Representatives on Nov 5 -- something that will boost the economy in the long run (read more: 3 Big Winners as House Passes $1.2T US Infrastructure Bill).
3 Solid Growth Stocks to Buy Now
With the promising third-quarter earnings, better labor market conditions and the passing of the infrastructure bill by the House overshadowing inflation concerns, things are looking up for the stock market. Hence, it’s judicious to invest in the above-mentioned stocks that currently possess a Zacks Rank #1 (Strong Buy) and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
AutoNation is the largest automotive retailer in the United States. Its several sources of income as well as its diversified product mix are expected to boost bottom-line growth in the near future.
AutoNation’s initiative to expand stores is also praiseworthy. The Zacks Consensus Estimate for its current-year earnings has moved up 16.4% over the past 60 days. AutoNation’s expected earnings growth rate for the current year is a superb 142.6%.
Costco Wholesale sells high volumes of foods and general merchandise at discounted prices through membership warehouses. Costco Wholesale’s initiative to penetrate the e-commerce business has paid off well. Better price management and growth strategies also bode well for Costco Wholesale.
The Zacks Consensus Estimate for its current-year earnings has moved up 5% over the past 60 days. Costco Wholesale’s expected earnings growth rate for the current year is a steady 9.7%.
Tesla has evolved into a dynamic technology innovator. It recently became the second-fastest company to join the elite $1T club. The global demand to reduce carbon emissions has increased the requirement for electric vehicles -- something that suites Tesla well (read more: Tesla is a Screaming Buy as It Joins the Elite $1T Club).
The Zacks Consensus Estimate for its current-year earnings has moved up 16.8% over the past 60 days. Tesla’s expected earnings growth rate for the current year is a solid 166.5%.