Wall Street rallied in January on hopes that the Federal Reserve is likely done with interest rate hikes and rate cuts are in the anvil. The positive outlook has made consumers a lot more confident now, which saw the consumer confidence level and future outlook making a solid jump in January.

The Conference Board said on Jan 30 that the U.S. consumer confidence level index raced to 114.8 in January, way above December’s reading of 108. January’s reading not only reflected the third straight monthly jump in consumer confidence reading but also was the highest reading since December 2021.

Also, the sub-index for the current economic condition rose to 83.3 in January from 73.3 in December. The sub-index for consumer expectations jumped to 75.9 in January, which was also well above the December reading of 67.4.

The reading came just days after the University of Michigan reported that the preliminary index of the U.S. consumer sentiment for January came up with a reading of 78.8, surpassing economists’ expectations of 69.7, and hitting the highest level since July 2021.

Cooling inflation and easing price pressure are boosting consumer confidence as they now believe that the economy will have a softer landing than expected earlier.

Although last week, the Federal Reserve said that the central bank would likely not be ready for the first rate cut in March, it also hinted that the interest rate hike campaign has ended. If not March, rate cuts will be implemented in the coming months, which has made investors confident.

Lower interest rates bode well for the broader economy as they will lessen the burden on consumers, who will be allowed more purchasing power.

Our Choices

We have narrowed our search to five consumer discretionary stocks such as Dolby Laboratories, Inc. (DLB Quick QuoteDLB - Free Report) , American Woodmark Corporation (AMWD Quick QuoteAMWD - Free Report) , Hooker Furnishings Corporation (HOFT Quick QuoteHOFT - Free Report) , Lululemon Athletica Inc. (LULU Quick QuoteLULU - Free Report) and Royal Caribbean Cruises Ltd. (RCL Quick QuoteRCL - Free Report) , which have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.   

Dolby Laboratories, Inc. develops audio and imaging technologies that revolutionize entertainment for user-generated content, TV shows, films, music, and gaming. A majority of DLB’s revenues are derived from the licensing of audio technologies. Dolby Laboratories operates on various licensing models, including a two-tier model, an integrated licensing model, a patent licensing model, recoveries and collaboration arrangements.

Dolby Laboratories’expected earnings growth rate for the current year is 4.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. DLB currently has a Zacks Rank #2.

American Woodmark Corporation is the third-largest manufacturer of kitchen and bath cabinets. Offering more than 340 cabinet lines in a wide variety of designs, materials and finishes, AMWD products are sold through a network of dealers and distributors and directly to home centers and major homebuilders. American Woodmark offers over 500 cabinet styles for the remodeling and new home construction markets under four major brands: American Woodmark, Shenandoah Cabinetry, Timberlake Cabinetry, and Waypoint Living Spaces.

American Woodmark Corporation’s expected earnings growth rate for the current year is 11.2%. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the past 60 days. AMWD presently sports a Zacks Rank #1.

Hooker Furnishings Corporation is a leading manufacturer and importer of residential furniture, primarily targeted at the upper-medium price range. HOFT offers diversified products, consisting primarily of home offices, entertainment centers, imported occasional, bedroom, and wall systems, across many style categories within this price range.

Hooker Furnishings Corporation’s expected earnings growth rate for the current year is 12.4%. The Zacks Consensus Estimate for current-year earnings has improved 76.8% over the past 60 days. HOFT presently sports a Zacks Rank #1.

Lululemon Athletica Inc. designs, manufactures and distributes athletic apparel and accessories for women, men and female youth. LULU offers a line of apparel assortment, including fitness pants, shorts, tops and jackets designed for a healthy lifestyle and athletic pursuits, such as yoga, training, and running, as well as other sweaty and general fitness under the lululemon athletica brand name.

Lululemon Athletica’s expected earnings growth rate for the current year is 23.8%. The Zacks Consensus Estimate for the current-year earnings has improved 2.7% over the past 60 days. LULU presently carries a Zacks Rank #2.

Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises' brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.

Royal Caribbean Cruises' expected earnings growth rate for the current year is 36.8%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. RCL currently sports a Zacks Rank #1.