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Top Wall Street Stories of 2022 to Continue in 2023: 5 Picks
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With just a few trading days left, 2022 is likely to turn out the worst year for the U.S. stock market in over a decade. The S&P 500 Index is down 19.8% this year — the benchmark’s first double-digit percentage loss since 2008, when it slid 36.6% during the global financial crisis, according to Dow Jones Market Data. The Dow Jones Industrial Average has declined 8.6% while the tech-heavy Nasdaq Composite Index plunged the most by 32.9%.
Persistently high inflation, a hawkish Fed, Russia's invasion of Ukraine and a resurgence of COVID-19 cases in China are weighing heavily on investor sentiment. The combination has sparked fears of a recession anytime soon and is expected to influence the stock market in a big way in the New Year as well.
As such, investors should consider stocks such as Sociedad Quimica Minera Chile SA (SQM - Free Report) , NBT Bancorp (NBTB - Free Report) , Cal-Maine Foods Inc. (CALM - Free Report) , e.l.f. Beauty, Inc. (ELF - Free Report) and Halliburton Company (HAL - Free Report) that could be compelling picks to tap the trend.
Let’s discuss these events in detail below with the stocks:
Skyrocketing Inflation
Inflation in the United States is cooling down gradually, underscoring that the worst of inflation has likely passed and the economy will be back on track sooner than expected. This is especially true as the consumer price index jumped 7.1% year over year in November, down from a 7.7% year-over-year increase in October and a recent peak of 9.1% in June. This represents the lowest annual increase since late 2021 but was still more than three times the Fed's historic 2% inflation target.
Investors could make some profits by investing in stocks benefiting from rising inflation. While there are many options, Sociedad Quimica could be an exciting bet. With a market cap of $23.5 billion, Sociedad Quimica produces fertilizer and iodine and manufactures industrial chemicals and iodine derivative products.
The stock has soared nearly 63% this year. Sociedad Quimica has an estimated earnings growth rate of 176.6% for next year. It carries a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hawkish Fed
The Fed has been on an aggressive tightening spree for more than decades. Fed Chair Jerome Powell raised interest rates for the seventh time this year, taking the benchmark rate to the range of 3.75% and 4.00% — the highest level since 2008. The hike in interest rates has made borrowing expensive, pushed up the cost of buying a new car or house and increased the cost of carrying credit card debt.
The financial sector seems to be the biggest beneficiary of the Fed’s move. This is because the steepening yield curve would bolster profits for banks, insurance companies and discount brokerage firms. NBT Bancorp is a one bank holding company engaged in the general banking business. The stock has risen about 13% this year and is expected to maintain its bullish trend heading into 2023.
With a market cap of $1.9 billion, NBT Bancorp has an impressive estimated earnings growth of 3% for next year. It has a Zacks Rank #2 (Buy) and a Momentum Score of A.
Russia-Ukraine Crisis
The ongoing tensions between Moscow and Western countries over Ukraine have led to supply disruption fears in an already-tight commodity market. Russia is a commodities powerhouse and a key supplier of energy, metals and agriculture, while Ukraine is a major exporter of corn and wheat. Together, Russia and Ukraine account for roughly 29% of the global wheat export market.
Although most companies are benefiting from this trend, Cal-Maine Foods surged about 75% this year. It is primarily engaged in the production, grading, packing and sale of fresh shell eggs, including conventional, cage-free, organic and nutritionally-enhanced eggs. Cal-Maine Foods has an estimated growth rate of 222% for the fiscal year (ending May 2023) and has a market cap of $3.2 billion.
CALM has a Zacks ETF Rank #1 and a VGM Score of A.
Recession Fears
As the global economy is struggling with skyrocketing inflation and low growth, the recession seems to be warranted. Economists predict that there is a 7-in-10 likelihood that the U.S. economy will sink into a recession next year, in the wake of massive interest-rate hikes by the Federal Reserve. The probability of a downturn in 2023 climbed from 65% odds in November and is more than double than what was projected six months ago, according to the latest Bloomberg monthly survey of economists.
The consumer staples sector is viewed as defensive as it includes a variety of items like food & beverages, non-durable household goods, hypermarkets and consumer supercenters that are essential for daily needs. These products see steady demand even during an economic downturn due to their low levels of correlation with economic cycles. e.l.f. Beauty operates as a cosmetic company. Its cosmetic category primarily consists of face makeup, eye makeup, lip products, nail products and cosmetics sets/kits, excludes beauty tools and accessories, such as brushes and applicators.
e.l.f. Beauty earnings are expected to be 33.3% for the fiscal year (ending March 2023). ELF is up 64% this year and has a Zacks ETF Rank #1 (Strong Buy). The stock has a Growth Score of B and a market cap of $2.9 billion.
Energy Sector: A Winner
The energy sector has been the outperformer this year on surging oil prices. Tightening supply and improving demand fundamentals have been driving prices higher. Overall demand for fuel has rebounded to the pre-pandemic levels. As such, shares of Halliburton jumped 71% this year and has the potential to move higher further in 2023. The company is one of the largest oilfield service providers in the world, offering a variety of equipment, maintenance, and engineering and construction services to the energy, industrial and government sectors.
Halliburton Company has an estimated earnings growth rate of 41.9% for next year and carries a Zacks Rank #2. The stock has a Growth Score of B and a market cap of $35.5 billion.
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Top Wall Street Stories of 2022 to Continue in 2023: 5 Picks
With just a few trading days left, 2022 is likely to turn out the worst year for the U.S. stock market in over a decade. The S&P 500 Index is down 19.8% this year — the benchmark’s first double-digit percentage loss since 2008, when it slid 36.6% during the global financial crisis, according to Dow Jones Market Data. The Dow Jones Industrial Average has declined 8.6% while the tech-heavy Nasdaq Composite Index plunged the most by 32.9%.
Persistently high inflation, a hawkish Fed, Russia's invasion of Ukraine and a resurgence of COVID-19 cases in China are weighing heavily on investor sentiment. The combination has sparked fears of a recession anytime soon and is expected to influence the stock market in a big way in the New Year as well.
As such, investors should consider stocks such as Sociedad Quimica Minera Chile SA (SQM - Free Report) , NBT Bancorp (NBTB - Free Report) , Cal-Maine Foods Inc. (CALM - Free Report) , e.l.f. Beauty, Inc. (ELF - Free Report) and Halliburton Company (HAL - Free Report) that could be compelling picks to tap the trend.
Let’s discuss these events in detail below with the stocks:
Skyrocketing Inflation
Inflation in the United States is cooling down gradually, underscoring that the worst of inflation has likely passed and the economy will be back on track sooner than expected. This is especially true as the consumer price index jumped 7.1% year over year in November, down from a 7.7% year-over-year increase in October and a recent peak of 9.1% in June. This represents the lowest annual increase since late 2021 but was still more than three times the Fed's historic 2% inflation target.
Investors could make some profits by investing in stocks benefiting from rising inflation. While there are many options, Sociedad Quimica could be an exciting bet. With a market cap of $23.5 billion, Sociedad Quimica produces fertilizer and iodine and manufactures industrial chemicals and iodine derivative products.
The stock has soared nearly 63% this year. Sociedad Quimica has an estimated earnings growth rate of 176.6% for next year. It carries a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hawkish Fed
The Fed has been on an aggressive tightening spree for more than decades. Fed Chair Jerome Powell raised interest rates for the seventh time this year, taking the benchmark rate to the range of 3.75% and 4.00% — the highest level since 2008. The hike in interest rates has made borrowing expensive, pushed up the cost of buying a new car or house and increased the cost of carrying credit card debt.
The financial sector seems to be the biggest beneficiary of the Fed’s move. This is because the steepening yield curve would bolster profits for banks, insurance companies and discount brokerage firms. NBT Bancorp is a one bank holding company engaged in the general banking business. The stock has risen about 13% this year and is expected to maintain its bullish trend heading into 2023.
With a market cap of $1.9 billion, NBT Bancorp has an impressive estimated earnings growth of 3% for next year. It has a Zacks Rank #2 (Buy) and a Momentum Score of A.
Russia-Ukraine Crisis
The ongoing tensions between Moscow and Western countries over Ukraine have led to supply disruption fears in an already-tight commodity market. Russia is a commodities powerhouse and a key supplier of energy, metals and agriculture, while Ukraine is a major exporter of corn and wheat. Together, Russia and Ukraine account for roughly 29% of the global wheat export market.
Although most companies are benefiting from this trend, Cal-Maine Foods surged about 75% this year. It is primarily engaged in the production, grading, packing and sale of fresh shell eggs, including conventional, cage-free, organic and nutritionally-enhanced eggs. Cal-Maine Foods has an estimated growth rate of 222% for the fiscal year (ending May 2023) and has a market cap of $3.2 billion.
CALM has a Zacks ETF Rank #1 and a VGM Score of A.
Recession Fears
As the global economy is struggling with skyrocketing inflation and low growth, the recession seems to be warranted. Economists predict that there is a 7-in-10 likelihood that the U.S. economy will sink into a recession next year, in the wake of massive interest-rate hikes by the Federal Reserve. The probability of a downturn in 2023 climbed from 65% odds in November and is more than double than what was projected six months ago, according to the latest Bloomberg monthly survey of economists.
The consumer staples sector is viewed as defensive as it includes a variety of items like food & beverages, non-durable household goods, hypermarkets and consumer supercenters that are essential for daily needs. These products see steady demand even during an economic downturn due to their low levels of correlation with economic cycles. e.l.f. Beauty operates as a cosmetic company. Its cosmetic category primarily consists of face makeup, eye makeup, lip products, nail products and cosmetics sets/kits, excludes beauty tools and accessories, such as brushes and applicators.
e.l.f. Beauty earnings are expected to be 33.3% for the fiscal year (ending March 2023). ELF is up 64% this year and has a Zacks ETF Rank #1 (Strong Buy). The stock has a Growth Score of B and a market cap of $2.9 billion.
Energy Sector: A Winner
The energy sector has been the outperformer this year on surging oil prices. Tightening supply and improving demand fundamentals have been driving prices higher. Overall demand for fuel has rebounded to the pre-pandemic levels. As such, shares of Halliburton jumped 71% this year and has the potential to move higher further in 2023. The company is one of the largest oilfield service providers in the world, offering a variety of equipment, maintenance, and engineering and construction services to the energy, industrial and government sectors.
Halliburton Company has an estimated earnings growth rate of 41.9% for next year and carries a Zacks Rank #2. The stock has a Growth Score of B and a market cap of $35.5 billion.