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Weak Economic Data a Boon for Wall Street: 5 Growth Picks
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A not-so-strong employment picture in December and a contraction in service sector activity showed that inflation may be cooling and that the Federal Reserve may not unleash a slew of rate hikes this year, as it did last year.
Per the U.S. Bureau of Labor Statistics, employers in the United States added 223,000 jobs last month, more than analysts’ estimate of 200,000. But December’s job growth was the smallest in two years. What’s more, wage growth has begun to slow down. Average hourly wages increased by 0.3% in December, down from 0.4% in November. It’s also below analysts’ forecast of an increase of 0.4%.
On a year-over-year basis, average hourly wages may have increased by 4.6% last month, but it’s down from November’s 4.8%. At the same time, average hourly wages may have risen 4.1% on an annual basis in the past three-month period, yet it’s less than 5.9% at the beginning of 2022, citing a MarketWatch article.
In the meantime, the service sector activity in the United States contracted for the first time in two-and-a-half years in December. The non-manufacturing PMI of the Institute of Supply Management dropped to 49.6 in December from November’s reading of 56.5. The services PMI dropped below the 50-mark for the first time since May 2020 and indicated a contraction in that part of the sector, which constitutes more than two-thirds of economic activity in the United States.
Thus, with contraction in the service sector amid weakening demand along with wage and job growth slowing, consumers’ propensity to spend is poised to decline. And with a broader pullback in consumer outlays, the price increase of essential goods and services will decline rapidly.
And with ebbing inflationary pressure, the Fed is unlikely to remain hawkish this year, and achieve a soft landing, something that bodes well for the stock market. The Fed is now very much on its path to curtail economic and inflation growth while preventing the economy from entering a recession.
Given such positives, from an investment standpoint, investors should place their bets on growth stocks since the broader market is pretty well set to perform better this year compared to the past year (Read More: After a Gloomy 2022, 2023 Could be Much Better: 5 Growth Picks).
We have, therefore, highlighted five stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy), and a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.
Bowman Consulting Group (BWMN - Free Report) provides planning, engineering, construction management, commissioning, environmental consulting, geomatics, survey, land procurement, and other technical services to customers operating in a diverse set of regulated end markets. BWMN has a Zacks Rank #1 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 42.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 1,566.7%.
Casey's General Stores (CASY - Free Report) operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. CASY has a Zacks Rank #1 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 7.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 18.4%.
Clearfield (CLFD - Free Report) designs and manufactures the FieldSmart fiber management platform, which includes its latest generation Fiber Distribution System and Fiber Scalability Center. CLFD has a Zacks Rank #1 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up 30.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 32.4%.
Murphy USA (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States. MUSA has a Zacks Rank #1 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 4% over the past 60 days. The company’s expected earnings growth rate for the current year is 80.9%.
Archer Daniels Midland (ADM - Free Report) is one of the leading producers of food and beverage ingredients as well as goods made from various agricultural products. ADM has a Zacks Rank #2 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 30 days. The company’s expected earnings growth rate for the current year is 44.1%.
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Weak Economic Data a Boon for Wall Street: 5 Growth Picks
A not-so-strong employment picture in December and a contraction in service sector activity showed that inflation may be cooling and that the Federal Reserve may not unleash a slew of rate hikes this year, as it did last year.
Per the U.S. Bureau of Labor Statistics, employers in the United States added 223,000 jobs last month, more than analysts’ estimate of 200,000. But December’s job growth was the smallest in two years. What’s more, wage growth has begun to slow down. Average hourly wages increased by 0.3% in December, down from 0.4% in November. It’s also below analysts’ forecast of an increase of 0.4%.
On a year-over-year basis, average hourly wages may have increased by 4.6% last month, but it’s down from November’s 4.8%. At the same time, average hourly wages may have risen 4.1% on an annual basis in the past three-month period, yet it’s less than 5.9% at the beginning of 2022, citing a MarketWatch article.
In the meantime, the service sector activity in the United States contracted for the first time in two-and-a-half years in December. The non-manufacturing PMI of the Institute of Supply Management dropped to 49.6 in December from November’s reading of 56.5. The services PMI dropped below the 50-mark for the first time since May 2020 and indicated a contraction in that part of the sector, which constitutes more than two-thirds of economic activity in the United States.
Thus, with contraction in the service sector amid weakening demand along with wage and job growth slowing, consumers’ propensity to spend is poised to decline. And with a broader pullback in consumer outlays, the price increase of essential goods and services will decline rapidly.
And with ebbing inflationary pressure, the Fed is unlikely to remain hawkish this year, and achieve a soft landing, something that bodes well for the stock market. The Fed is now very much on its path to curtail economic and inflation growth while preventing the economy from entering a recession.
Given such positives, from an investment standpoint, investors should place their bets on growth stocks since the broader market is pretty well set to perform better this year compared to the past year (Read More: After a Gloomy 2022, 2023 Could be Much Better: 5 Growth Picks).
We have, therefore, highlighted five stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy), and a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.
Bowman Consulting Group (BWMN - Free Report) provides planning, engineering, construction management, commissioning, environmental consulting, geomatics, survey, land procurement, and other technical services to customers operating in a diverse set of regulated end markets. BWMN has a Zacks Rank #1 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 42.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 1,566.7%.
Casey's General Stores (CASY - Free Report) operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. CASY has a Zacks Rank #1 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 7.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 18.4%.
Clearfield (CLFD - Free Report) designs and manufactures the FieldSmart fiber management platform, which includes its latest generation Fiber Distribution System and Fiber Scalability Center. CLFD has a Zacks Rank #1 and a Growth Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up 30.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 32.4%.
Murphy USA (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States. MUSA has a Zacks Rank #1 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 4% over the past 60 days. The company’s expected earnings growth rate for the current year is 80.9%.
Archer Daniels Midland (ADM - Free Report) is one of the leading producers of food and beverage ingredients as well as goods made from various agricultural products. ADM has a Zacks Rank #2 and a Growth Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 30 days. The company’s expected earnings growth rate for the current year is 44.1%.