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Economic Data Raises Hope for Soft Landing: 5 Top Picks
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U.S. stock markets closed higher on Friday buoyed by strong economic data. A resilient labor market and increasing consumer sentiment boosted market participants’ expectations of a soft landing of the economy.
Labor Market Cooling but Not Tumbling
The resilient labor market has been showing signs of cracks over the last four weeks. The weekly jobless claims for the last four weeks remained soft. The Department of Labor reported that job openings totaled a seasonally adjusted 8.73 million for October, a decrease of 617,000 or 6.6% month over month.
October’s metric was well below the consensus estimate of 9.4 million, marking the lowest level of job openings since March 2021. Consequently, the ratio of job openings to available workers declined to 1.3 to 1. The metric was nearly in line with the pre-pandemic level of the ratio of 1.2 to 1.
On the other hand, the Department of Labor reported that the U.S. economy added 199,000 nonfarm workers in November compared with the consensus estimate of 170,000. The metric for October was 150,000.
The unemployment rate fell to 3.7% in November from 3.9% in October. The consensus estimate was also 3.9%. This was primarily due to a higher labor force participation rate of 62.8%. However, the real unemployment rate (including discouraged workers and those holding part-time positions for economic reasons) fell to 7% in November from 7.2% in October.
Average hourly earnings rose 0.4% month over month in November compared with 0.2% in October. The consensus estimate was 0.3%. Year over year, the wage rate increased 4% in November, in line with the consensus estimate.
Consumer Sentiment Climbs
The University of Michigan reported that the preliminary reading of the index for consumer sentiment jumped 13% to 69.4% in December from a six-month low of 61.3 in November. The consensus estimate was 62.4. The preliminary reading for December was the highest since August.
The sub-index for the current condition climbed to 74 in December from 68.3 in November. The sub-index for future expectations surged to 66.4 in December from 56.8 in November.
In December, Americans expect the inflation rate to cool down to 3.1% next year from 4.5% in November. The metric for December marked the lowest level since March 2021. Expectations of inflation over the next five years fell to 2.8% in December from 3.2% in November. The metric for November was the highest since 2011.
Investors’ Expectations
According to CME’s FedWatch tool, traders are currently associating nearly 98% probability that the Fed will keep the benchmark lending rate unchanged at the range of 5.25-5.5% in the December FOMC meeting. Moreover, 45% of respondents expect the first rate cut to be initiated in the March 2024 FOMC meeting.
The Fed raised the benchmark interest rate sharply by 5.25% from March 2022 to November 2023. Despite adopting extreme monetary hardness, the fundamentals of the U.S. economy remain rock solid. If the ongoing hardship fails to push the economy into a recession, we can safely assume that the relaxation of tight monetary control will reinvigorate the U.S. economy in 2024.
Our Top Picks
We have narrowed our search to five large-cap (market capital > $20 billion) stocks that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks sports a Zacks Rank #1 (Strong 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 in the past six months.
Image Source: Zacks Investment Research
Gartner Inc. (IT - Free Report) is reportedly the world’s leading information technology research and advisory firm. IT offers rich domain expertise and technology-related insight necessary for an informed decision-making process. Over the years, IT’s comprehensive services portfolio has enabled customers across the spectrum to research, analyze and interpret the business with greater precision, efficiency and discipline.
Gartner has an expected revenue and earnings growth rate of 7.7% and 9.3%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.9% over the last 30 days.
Intel Corp. (INTC - Free Report) designs, develops, manufactures, markets, and sells computing and related products worldwide. INTC operates through the Client Computing Group, Data Center and AI, Network and Edge, Mobileye, Accelerated Computing Systems and Graphics, Intel Foundry Services, and Other segments.
INTC mainly offers platform products, such as central processing units and chipsets, system-on-chip and multichip packages, accelerators, boards and systems, connectivity products, and memory and storage products.
Intel has an expected revenue and earnings growth rate of 13.7% and 98.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 1.6% over the last 30 days.
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from solid demand for cruising and acceleration in booking volumes. RCL’s emphasis on strong pricing (on closer-in-demand) bodes well.
In the third quarter, RCL reported accelerating demand for 2024 sailings. RCL intends to focus on new innovative ships and onboard experiences to boost its offering and deliver superior yields and margins.
Royal Caribbean Cruises has an expected revenue and earnings growth rate of 13.7% and 37.4%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.4% over the last 30 days.
The Progressive Corp. (PGR - Free Report) continues to gain on higher premiums, given its compelling product portfolio, leadership position and strength in both Vehicle and Property businesses. Focus on becoming a one-stop insurance destination, catering to customers opting for a combination of home and auto insurance, augurs well for PGR’s growth.
Policies in force and retention ratio should remain healthy for PGR. Competitive pricing to retain current customers and address customer needs with new offerings should continue to drive policy life expectancy.
The Progressive has an expected revenue and earnings growth rate of 13.3% and 49%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 2.9% over the last 30 days.
Emerson Electric Co. (EMR - Free Report) has been benefiting from healthy demand across end markets. Strong demand across the process and hybrid markets are driving EMR’s underlying sales. The successive deals to acquire Afag and Flexim spark optimism. Emerson Electric’s $8.2 billion deal to acquire National Instruments holds promise. EMR’s bullish guidance for fiscal 2023 is encouraging.
Emerson Electric has an expected revenue and earnings growth rate of 14.1% and 17.3%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 2% over the last 30 days.
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Economic Data Raises Hope for Soft Landing: 5 Top Picks
U.S. stock markets closed higher on Friday buoyed by strong economic data. A resilient labor market and increasing consumer sentiment boosted market participants’ expectations of a soft landing of the economy.
Labor Market Cooling but Not Tumbling
The resilient labor market has been showing signs of cracks over the last four weeks. The weekly jobless claims for the last four weeks remained soft. The Department of Labor reported that job openings totaled a seasonally adjusted 8.73 million for October, a decrease of 617,000 or 6.6% month over month.
October’s metric was well below the consensus estimate of 9.4 million, marking the lowest level of job openings since March 2021. Consequently, the ratio of job openings to available workers declined to 1.3 to 1. The metric was nearly in line with the pre-pandemic level of the ratio of 1.2 to 1.
On the other hand, the Department of Labor reported that the U.S. economy added 199,000 nonfarm workers in November compared with the consensus estimate of 170,000. The metric for October was 150,000.
The unemployment rate fell to 3.7% in November from 3.9% in October. The consensus estimate was also 3.9%. This was primarily due to a higher labor force participation rate of 62.8%. However, the real unemployment rate (including discouraged workers and those holding part-time positions for economic reasons) fell to 7% in November from 7.2% in October.
Average hourly earnings rose 0.4% month over month in November compared with 0.2% in October. The consensus estimate was 0.3%. Year over year, the wage rate increased 4% in November, in line with the consensus estimate.
Consumer Sentiment Climbs
The University of Michigan reported that the preliminary reading of the index for consumer sentiment jumped 13% to 69.4% in December from a six-month low of 61.3 in November. The consensus estimate was 62.4. The preliminary reading for December was the highest since August.
The sub-index for the current condition climbed to 74 in December from 68.3 in November. The sub-index for future expectations surged to 66.4 in December from 56.8 in November.
In December, Americans expect the inflation rate to cool down to 3.1% next year from 4.5% in November. The metric for December marked the lowest level since March 2021. Expectations of inflation over the next five years fell to 2.8% in December from 3.2% in November. The metric for November was the highest since 2011.
Investors’ Expectations
According to CME’s FedWatch tool, traders are currently associating nearly 98% probability that the Fed will keep the benchmark lending rate unchanged at the range of 5.25-5.5% in the December FOMC meeting. Moreover, 45% of respondents expect the first rate cut to be initiated in the March 2024 FOMC meeting.
The Fed raised the benchmark interest rate sharply by 5.25% from March 2022 to November 2023. Despite adopting extreme monetary hardness, the fundamentals of the U.S. economy remain rock solid. If the ongoing hardship fails to push the economy into a recession, we can safely assume that the relaxation of tight monetary control will reinvigorate the U.S. economy in 2024.
Our Top Picks
We have narrowed our search to five large-cap (market capital > $20 billion) stocks that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks sports a Zacks Rank #1 (Strong 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 in the past six months.
Image Source: Zacks Investment Research
Gartner Inc. (IT - Free Report) is reportedly the world’s leading information technology research and advisory firm. IT offers rich domain expertise and technology-related insight necessary for an informed decision-making process. Over the years, IT’s comprehensive services portfolio has enabled customers across the spectrum to research, analyze and interpret the business with greater precision, efficiency and discipline.
Gartner has an expected revenue and earnings growth rate of 7.7% and 9.3%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.9% over the last 30 days.
Intel Corp. (INTC - Free Report) designs, develops, manufactures, markets, and sells computing and related products worldwide. INTC operates through the Client Computing Group, Data Center and AI, Network and Edge, Mobileye, Accelerated Computing Systems and Graphics, Intel Foundry Services, and Other segments.
INTC mainly offers platform products, such as central processing units and chipsets, system-on-chip and multichip packages, accelerators, boards and systems, connectivity products, and memory and storage products.
Intel has an expected revenue and earnings growth rate of 13.7% and 98.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 1.6% over the last 30 days.
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from solid demand for cruising and acceleration in booking volumes. RCL’s emphasis on strong pricing (on closer-in-demand) bodes well.
In the third quarter, RCL reported accelerating demand for 2024 sailings. RCL intends to focus on new innovative ships and onboard experiences to boost its offering and deliver superior yields and margins.
Royal Caribbean Cruises has an expected revenue and earnings growth rate of 13.7% and 37.4%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.4% over the last 30 days.
The Progressive Corp. (PGR - Free Report) continues to gain on higher premiums, given its compelling product portfolio, leadership position and strength in both Vehicle and Property businesses. Focus on becoming a one-stop insurance destination, catering to customers opting for a combination of home and auto insurance, augurs well for PGR’s growth.
Policies in force and retention ratio should remain healthy for PGR. Competitive pricing to retain current customers and address customer needs with new offerings should continue to drive policy life expectancy.
The Progressive has an expected revenue and earnings growth rate of 13.3% and 49%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 2.9% over the last 30 days.
Emerson Electric Co. (EMR - Free Report) has been benefiting from healthy demand across end markets. Strong demand across the process and hybrid markets are driving EMR’s underlying sales. The successive deals to acquire Afag and Flexim spark optimism. Emerson Electric’s $8.2 billion deal to acquire National Instruments holds promise. EMR’s bullish guidance for fiscal 2023 is encouraging.
Emerson Electric has an expected revenue and earnings growth rate of 14.1% and 17.3%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 2% over the last 30 days.