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4 Stocks to Buy as Services Sector Activity Hits Record High

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The services sector has been doing well since the economy reopened, following the pandemic-induced lockdown. The expansion continues, with the index hitting an all-time high in November.

The Delta variant had created a rampage in the third quarter and now the Omicron variant of the coronavirus is raising concerns. Yet, people’s confidence hasn’t dented much, thanks to the massive vaccination drive that saw the economy reopening faster than expected.

Given this situation, stocks like The Interpublic Group of Companies (IPG - Free Report) , HeadHunter Group (HHR - Free Report) , Avis Budget Group, Inc. (CAR - Free Report) and Robert Half International (RHI - Free Report) are benefiting.

Services Sector Continues to Expand

Per the latest reading from the Institute of Supply Management (ISM), the services purchasing managers’ index (PMI) came up with a reading of 69.1 for October. This is the highest reading in the history of the series since 1997. It also surpassed analysts’ expectations of 65. The index had hit 66.7% in October.

The services sector accounts for more than two-thirds of U.S. economic activity. A reading of anything above 50 indicates expansion in service activities. The reading definitely paints a rosy picture of the economy given that the pandemic is far from over. Moreover, the services sector has now grown for 18 consecutive months.

Besides, the Business Activity Index hit another record high of 74.6% in November, increasing 4.8% from the October mark of 69.8%. The New Orders Index came up with a reading of 69.7, in line with October. Also, employment in the services industry showed impressive growth in November. The Services Employment Index rose to 56.5% in November, increasing 4.9% months over month and recording its fifth consecutive month of growth.

Economic Reopening Boosting Business Activity

Per the ISM report, all 18 industries registered growth. The maximum growth was witnessed in Arts, Entertainment & Recreation; Retail Trade; Mining; Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Transportation & Warehousing.

Understandably, the industries expected to benefit the most from economic reopening have been witnessing maximum activity. The services sector had contracted 41.8% and 45.4% last year in April and May, respectively, but has been growing since then.

As people are still working and learning from home, they are more technology-dependent now, boosting tech services. Also, spending on services has gained traction as people have slowed down their investment in goods, which had peaked during the pandemic.

The report proves that the country’s economy is fast getting back on its feet. Moreover, the report is supported by strong personal income and personal spending data. U.S. consumer spending jumped a solid 1.3% in October despite inflation. Also, personal income, which gives the power for future spending, increased 0.5% in October.

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Business services are only likely to increase in the coming months as more people get vaccinated and the economy further reopens. This will only help people get back their confidence and business services to grow.

The Interpublic Group of Companies together with its subsidiaries, provides advertising and marketing services worldwide. IPG specializes in consumer advertising, digital marketing, public relations, communications planning and media buying, and specialized communications disciplines. Interpublic focuses on point-to-point client interaction, which enables accurate decision-making and enhances customer focus.

Interpublic’s expected earnings growth rate for the current year is 49.1%. The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the past 60 days. Shares of IPG have gained 3.9% in the past six months. Interpublic holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Avis Budget Group, Inc. operates as a leading vehicle rental operator in North America, Europe and Australasia with an average rental fleet of nearly 650,000 vehicles. CAR provides mobility solutions through its three most-recognized brands — Avis, Budget and Zipcar. Avis Budget Group has licensees in approximately 175 countries throughout the world.

Avis Budget Group’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 62.8% over the past 60 days. Shares of CAR have gained more than 100% in the past three months. Avis Budget Group has a Zacks Rank #1.

HeadHunter Group provides an online recruitment platform. HHR offers services which consist of career guidance, career consultation, jobs by profession and the opportunity to create a resume and receive automatically suitable job opportunities. HeadHunter Group provides services to businesses that are looking for new employees to fill vacancies inside their organizations.

HeadHunter Group’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 17.2% over the past 60 days. Shares of HHR have gained 38% in the past six months. HeadHunter Group has a Zacks Rank #1.

Robert Half International is one of the world's largest providers of professional consulting and staffing services. RHI operates through three segments: Temporary and Consultant Staffing, Permanent Placement Staffing, and Risk Consulting and Internal Audit Services.

Robert Half International’s wholly owned subsidiary Protiviti, through which it offers risk consulting, internal audit and information technology consulting services, is also putting up a great show. Protiviti is increasingly focusing on technology consulting, with additional emphasis on cloud computing, cybersecurity and digital transformation. 

Robert Half International’sexpected earnings growth rate for the current year is 95.9%. The Zacks Consensus Estimate for current-year earnings has improved 5.4% over the past 60 days. Shares of RHI have gained 3.8% in the past three months. Robert Half International currently carries a Zacks Rank #2.