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5 Top Stocks to Tap the Steady Fall in Inflation Rate
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The Fed’s decision to pursue stringent monetary policies and rigorous hike in the benchmark interest rate has started paying off. Inflation has declined steadily in the past year. The latest inflation data of June — the consumer price index (CPI) and the producer price index (PPI) — have reaffirmed this trend.
On Jul 12, the Department of Labor reported that CPI increased 0.2% month-over-month in June compared with the consensus estimate of 0.3%. CPI rose 0.1% month over month in May. Year over year, CPI rose 3% in June, lower-than-the consensus estimate of 3.1%. This marked the lowest annual reading of CPI since April 2021.
Notably, the headline CPI reached a 40-year high of 9.1% in June 2022. Thereafter, it has shown a sharp fall. Core CPI (excluding volatile food and energy items) also rose 0.2% month over month in June, below the consensus estimate of 0.3%. In May, core CPI was up 0.4% month over month.
Year over year, core CPI climbed 4.8% in June, lower-than-the consensus estimate of 5%. This marked the lowest year-over-year increase in core CPI since October 2021. However, the data remained elevated to the Fed’s target rate of 2%.
On Jul 13, the Department of Labor reported that PPI increased 0.1% month-over-month in June compared with the consensus estimate of 0.2%. Core PPI decreased 0.2% month over month in June in contrast to the consensus mark of a rise of 0.1%. In May, core PPI increased 0.1%.
A steady decline in the inflation rate may compel the central bank to move toward the end of the current rate hike cycle. Notably, the Fed paused the interest rate hike in the June FOMC meeting after 10 consecutive increases.
Top Picks
A lower interest rate is expected to benefit growth-oriented sectors like technology, communication services and consumer discretionary. We have selected five such stocks with strong potential for the rest of 2023. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
NVIDIA Corp. (NVDA - Free Report) is gaining from the strong growth of artificial intelligence, high-performance computing, and accelerated computing, which is boosting its Compute & Networking revenues. A surge in Hyperscale demand and a solid uptake of artificial intelligence-based smart cockpit infotainment solutions are acting as a tailwind for NVDA.
Zacks Rank #1 NVIDIA has an expected revenue and earnings growth rate of 58.3% and more than 100%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last seven days.
Palo Alto Networks Inc. (PANW - Free Report) has been benefiting from continuous deal wins and the increasing adoption of PANW’s next-generation security platforms, attributable to the rise in remote working and the need for stronger security.
Zacks Rank #1 Palo Alto Networks has an expected revenue and earnings growth rate of 21.3% and 16.2%, respectively, for the current year (ending July 2024). The Zacks Consensus Estimate for current-year earnings has improved 7.4% over the last 60 days.
Meta Platforms Inc. (META - Free Report) is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger, and Facebook has been a major growth driver.
META is considered to have pioneered the concept of social networking. Meta Platforms has taken measures to drive penetration in the emerging markets of South East Asia, Latin America and Africa.
Zacks Rank #2 Meta Platform has an expected revenue and earnings growth rate of 9.1% and 21.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days.
Marriott International Inc. (MAR - Free Report) is benefiting from its focus on expansion initiatives, digital innovation, and loyalty program. MAR is also gaining from reopening international borders and leniency in travel restrictions, which have resulted in solid leisure demand along with business and cross-border travel improvements. MAR is consistently trying to expand its worldwide presence and capitalize on the demand for hotels in international markets.
Zacks Rank #2 Marriott International has an expected revenue and earnings growth rate of 13.1% and 25.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. The stock price of MAR has advanced 24.7% year to date.
DraftKings Inc. (DKNG - Free Report) is a digital sports entertainment and gaming company catering to the competitive spirits of sports fans with products that include daily fantasy, regulated gaming, and digital media. DKNG is the only U.S.-based vertically integrated sports betting operator. DKNG is a multi-channel provider of sports betting and gaming technologies, powering sports and gaming entertainment for 50 operators across more than 15 U.S. and global markets.
Zacks Rank #2 DraftKings has an expected revenue and earnings growth rate of 43.9% and 41.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last seven days.
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5 Top Stocks to Tap the Steady Fall in Inflation Rate
The Fed’s decision to pursue stringent monetary policies and rigorous hike in the benchmark interest rate has started paying off. Inflation has declined steadily in the past year. The latest inflation data of June — the consumer price index (CPI) and the producer price index (PPI) — have reaffirmed this trend.
On Jul 12, the Department of Labor reported that CPI increased 0.2% month-over-month in June compared with the consensus estimate of 0.3%. CPI rose 0.1% month over month in May. Year over year, CPI rose 3% in June, lower-than-the consensus estimate of 3.1%. This marked the lowest annual reading of CPI since April 2021.
Notably, the headline CPI reached a 40-year high of 9.1% in June 2022. Thereafter, it has shown a sharp fall. Core CPI (excluding volatile food and energy items) also rose 0.2% month over month in June, below the consensus estimate of 0.3%. In May, core CPI was up 0.4% month over month.
Year over year, core CPI climbed 4.8% in June, lower-than-the consensus estimate of 5%. This marked the lowest year-over-year increase in core CPI since October 2021. However, the data remained elevated to the Fed’s target rate of 2%.
On Jul 13, the Department of Labor reported that PPI increased 0.1% month-over-month in June compared with the consensus estimate of 0.2%. Core PPI decreased 0.2% month over month in June in contrast to the consensus mark of a rise of 0.1%. In May, core PPI increased 0.1%.
A steady decline in the inflation rate may compel the central bank to move toward the end of the current rate hike cycle. Notably, the Fed paused the interest rate hike in the June FOMC meeting after 10 consecutive increases.
Top Picks
A lower interest rate is expected to benefit growth-oriented sectors like technology, communication services and consumer discretionary. We have selected five such stocks with strong potential for the rest of 2023. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
NVIDIA Corp. (NVDA - Free Report) is gaining from the strong growth of artificial intelligence, high-performance computing, and accelerated computing, which is boosting its Compute & Networking revenues. A surge in Hyperscale demand and a solid uptake of artificial intelligence-based smart cockpit infotainment solutions are acting as a tailwind for NVDA.
Zacks Rank #1 NVIDIA has an expected revenue and earnings growth rate of 58.3% and more than 100%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last seven days.
Palo Alto Networks Inc. (PANW - Free Report) has been benefiting from continuous deal wins and the increasing adoption of PANW’s next-generation security platforms, attributable to the rise in remote working and the need for stronger security.
Zacks Rank #1 Palo Alto Networks has an expected revenue and earnings growth rate of 21.3% and 16.2%, respectively, for the current year (ending July 2024). The Zacks Consensus Estimate for current-year earnings has improved 7.4% over the last 60 days.
Meta Platforms Inc. (META - Free Report) is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger, and Facebook has been a major growth driver.
META is considered to have pioneered the concept of social networking. Meta Platforms has taken measures to drive penetration in the emerging markets of South East Asia, Latin America and Africa.
Zacks Rank #2 Meta Platform has an expected revenue and earnings growth rate of 9.1% and 21.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days.
Marriott International Inc. (MAR - Free Report) is benefiting from its focus on expansion initiatives, digital innovation, and loyalty program. MAR is also gaining from reopening international borders and leniency in travel restrictions, which have resulted in solid leisure demand along with business and cross-border travel improvements. MAR is consistently trying to expand its worldwide presence and capitalize on the demand for hotels in international markets.
Zacks Rank #2 Marriott International has an expected revenue and earnings growth rate of 13.1% and 25.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. The stock price of MAR has advanced 24.7% year to date.
DraftKings Inc. (DKNG - Free Report) is a digital sports entertainment and gaming company catering to the competitive spirits of sports fans with products that include daily fantasy, regulated gaming, and digital media. DKNG is the only U.S.-based vertically integrated sports betting operator. DKNG is a multi-channel provider of sports betting and gaming technologies, powering sports and gaming entertainment for 50 operators across more than 15 U.S. and global markets.
Zacks Rank #2 DraftKings has an expected revenue and earnings growth rate of 43.9% and 41.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last seven days.