Consumer spending in the United States showed unforeseen resilience amid steadily increasing interest rates as the Federal Reserve continues to tame price pressures.

This means consumers feel confident to open up their wallets, subsequently benefiting consumer discretionary stocks such as Carrols Restaurant Group , American Eagle Outfitters (AEO Quick QuoteAEO - Free Report) , OneSpaWorld (OSW Quick QuoteOSW - Free Report) and MGM Resorts International (MGM Quick QuoteMGM - Free Report) .

Pickup in Retail Outlays

Sales at U.S. retailers picked up 0.7% month over month in July as Americans indulged in purchasing online items and dined out frequently. Last month, retail sales were broad-based, gaining 3.2% year over year. Retail sales improved by 2.3% from May through July compared to a year ago.

Gas stations, departmental stores, clothing stores, home centers and grocery stores all witnessed an increase in sales, a tell-tale sign that consumers are feeling self-assured about their financial conditions. After all, wages are increasing and consumers amassed a lot of savings during the pandemic, which they are willing to spend now (read more: 5 Stocks to Make the Most of Booming Retail Sales).

Consumer Spending Bouy GDP Growth

In the second quarter, the U.S. economy had accelerated to an annual growth rate of 2.4% despite concerns about a potential recession as the Fed hiked interest rates speedily in the past year to curb inflationary pressure. Between January and March this year, the U.S. economy also advanced at an annual rate of 2%, well above analysts’ estimates.

A burst of business investment drove growth in the second as well as first quarters. But consumer spending also helped the economy chug along. Consumer spending, which constitutes the bulk of economic activity, increased at an annual rate of 1.6% in the second quarter, followed by a robust 4.2% pace in the first three months of the year.

4 Top Consumer Discretionary Stocks to Buy Now

With the U.S. economy growing on the back of strong consumer spending that defied rising interest rates and surpassed expectations, consumer discretionary companies are in a better position to gain.

Thus, from an investment viewpoint, we have highlighted four such companies that provide nonobligatory products and services. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Carrols Restaurant Group is the largest BURGER KING franchisee in the United States. Currently, TAST sports a Zacks Rank #1.

The Zacks Consensus Estimate for its current-year earnings has increased 1,800% over the past 60 days. The company’s expected earnings growth for the current year is 124.3%.

American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. AEO currently has a Zacks Rank #2.

The Zacks Consensus Estimate for its current-year earnings has increased nearly 4% over the past 60 days. The company’s expected earnings growth for the current year is 8.3%.

OneSpaWorld is a provider and innovator in the fields of wellness, beauty, rejuvenation and transformation on cruise ships and land. OneSpaWorld has a Zacks Rank #2.

The Zacks Consensus Estimate for its current-year earnings has increased 15.1% over the past 60 days. The company’s expected earnings growth for the current year is 117.9%.

MGM Resorts International is a holding company and primarily owns and operates casino resorts through wholly owned subsidiaries. MGM Resorts has a Zacks Rank #1.

The Zacks Consensus Estimate for its current-year earnings has increased 19.3% over the past 60 days. The company’s expected earnings growth for next year is 13.4%.

Shares of Carrols Restaurant Group, American Eagle Outfitters, OneSpaWorld and MGM Resorts International have gained 400%, 17.5%, 20.3%, and 28.6%, respectively, so far this year.

Image Source: Zacks Investment Research