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Strong Economic Data Bolster Rate Hike Prospects: Top 5 Gainers
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Despite inflation turning higher to begin 2023 and raising concerns about higher interest rates, the business mood in the United States remains bright. The US Composite PMI Index, which generally encompasses both the manufacturing and services sectors, advanced to 50.2 in February from January’s reading of 46.8, per S&P Global.
U.S. business activity, here and now, has ended seven successive months of contraction, while manufacturing, in particular, improved due to better supply-chain situations. The bounce back in U.S. business activity fits in with current robust retail sales data, and a solid labor market, indicating momentum in the economy.
The Commerce Department noted that sales at U.S. retailers increased 3% in January, easily topping analysts’ estimate of a rise of 1.9%. Retail sales increased a solid 6.4% year over year, with all major categories reporting an improvement in sales. The stunningly good retail sales numbers came in when the economy added 517,000 jobs last month, and the unemployment rate touched a 53-year low, according to the Bureau of Labor Statistics.
However, signs of strength in consumer outlay along with broader improvement in business activity, raised concerns about an increase in inflationary pressure, resulting in the Federal Reserve hiking interest rates through summer. The most recent policy meeting of the Fed showed that most of the central bank officials have agreed upon an increase in interest rates by a 25-basis point soon, while Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard have even suggested a hike of 50-basis-point.
The CME FedWatch Tool now states that 73% of Fed funds futures traders are expecting a 25-basis-point hike in interest rates in March, followed by a quarter-of-a-percentage-point in May. Now, rate hikes may hamper economic growth and impact the stock market. But the financial sector, including banks, insurance players, and asset management companies, generally tends to gain from rising interest rates through increased profit margins (read more: 3 Top Stocks to Gain From Hawkish Fed Expectations).
Thus, we have selected five fundamentally solid stocks from the financial sector that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Selective Insurance Group (SIGI - Free Report) offers insurance products and services across the United States. Currently, Selective Insurance has a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up almost 9% over the past 60 days. SIGI’s expected earnings growth rate for the current year is 30.6%.
Axos Financial (AX - Free Report) is the holding company for BofI Federal Bank, which provides consumer and business banking products. Presently, Axos Financial has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up 3.6% over the past 60 days. AX’s expected earnings growth rate for the current year is 15.1%.
AssetMark Financial (AMK - Free Report) provides wealth management and technology solutions to financial advisers and their clients. Currently, AssetMark Financial has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its next-year earnings has moved up 5.1% over the past 60 days. AMK’s expected earnings growth rate for the current year is 23.6%.
East West Bancorp (EWBC - Free Report) provides various consumer as well as commercial banking services to the Asian-American community. Presently, Axos Financial has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up nearly 4% over the past 60 days. EWBC’s expected earnings growth rate for the current year is 15.2%.
State Street (STT - Free Report) primarily performs its business through its principal banking subsidiary, State Street Bank. Currently, State Street has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 6.4% over the past 60 days. STT’s expected earnings growth rate for the current year is 15.1%.
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Strong Economic Data Bolster Rate Hike Prospects: Top 5 Gainers
Despite inflation turning higher to begin 2023 and raising concerns about higher interest rates, the business mood in the United States remains bright. The US Composite PMI Index, which generally encompasses both the manufacturing and services sectors, advanced to 50.2 in February from January’s reading of 46.8, per S&P Global.
U.S. business activity, here and now, has ended seven successive months of contraction, while manufacturing, in particular, improved due to better supply-chain situations. The bounce back in U.S. business activity fits in with current robust retail sales data, and a solid labor market, indicating momentum in the economy.
The Commerce Department noted that sales at U.S. retailers increased 3% in January, easily topping analysts’ estimate of a rise of 1.9%. Retail sales increased a solid 6.4% year over year, with all major categories reporting an improvement in sales. The stunningly good retail sales numbers came in when the economy added 517,000 jobs last month, and the unemployment rate touched a 53-year low, according to the Bureau of Labor Statistics.
However, signs of strength in consumer outlay along with broader improvement in business activity, raised concerns about an increase in inflationary pressure, resulting in the Federal Reserve hiking interest rates through summer. The most recent policy meeting of the Fed showed that most of the central bank officials have agreed upon an increase in interest rates by a 25-basis point soon, while Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard have even suggested a hike of 50-basis-point.
The CME FedWatch Tool now states that 73% of Fed funds futures traders are expecting a 25-basis-point hike in interest rates in March, followed by a quarter-of-a-percentage-point in May. Now, rate hikes may hamper economic growth and impact the stock market. But the financial sector, including banks, insurance players, and asset management companies, generally tends to gain from rising interest rates through increased profit margins (read more: 3 Top Stocks to Gain From Hawkish Fed Expectations).
Thus, we have selected five fundamentally solid stocks from the financial sector that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Selective Insurance Group (SIGI - Free Report) offers insurance products and services across the United States. Currently, Selective Insurance has a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up almost 9% over the past 60 days. SIGI’s expected earnings growth rate for the current year is 30.6%.
Axos Financial (AX - Free Report) is the holding company for BofI Federal Bank, which provides consumer and business banking products. Presently, Axos Financial has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up 3.6% over the past 60 days. AX’s expected earnings growth rate for the current year is 15.1%.
AssetMark Financial (AMK - Free Report) provides wealth management and technology solutions to financial advisers and their clients. Currently, AssetMark Financial has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its next-year earnings has moved up 5.1% over the past 60 days. AMK’s expected earnings growth rate for the current year is 23.6%.
East West Bancorp (EWBC - Free Report) provides various consumer as well as commercial banking services to the Asian-American community. Presently, Axos Financial has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up nearly 4% over the past 60 days. EWBC’s expected earnings growth rate for the current year is 15.2%.
State Street (STT - Free Report) primarily performs its business through its principal banking subsidiary, State Street Bank. Currently, State Street has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 6.4% over the past 60 days. STT’s expected earnings growth rate for the current year is 15.1%.