Wall Street completed its best first quarter in more than two decades. All the three major stock indexes –- the Dow, S&P 500 and Nasdaq Composite –- jumped with double-digit growth, erasing their losses in the fourth quarter of 2018. Despite short-term fluctuations in the last week of March, owing to the partial inversion of government bond yields, the bulls had a smooth run. Wall Street is still has something to offer irrespective of the fact that the bull run is in its eleventh year.
Yield Curve Steadied
On Mar 22, the yield on 3-month U.S. Treasury Note surged ahead of the benchmark 10-year U.S. Treasury Note for the first time since 2007. Several economists consider this inversion of the 3-month and 10-year bond yields as an indication of an upcoming recession, resulting in stock market mayhem.
However, on Mar 29, the yield on 10-year U.S. Treasury Note closed at 2.414%, higher than the 3-month U.S. Treasury Note’s yield of 2.408%. With this, the threat of an impending recession in the U.S. economy disappeared.
Positive Developments on Trade Front
On Mar 29, White House said that the trade-related negotiation between the United States and China made progress in Beijing. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer met with China’s Vice Premier Liu He in a “candid and constructive discussions” last week. The two sides will meet once again in Washington this week to further advance negotiations.
On Mar 27, Reuters reported that China has made unprecedented proposals on a range of issues including the protection of U.S. intellectual properties to resolve trade disputes. An amicable solution between two of the world’s largest trading nations is likely to boost Wall Street.
Fed’s Dovish Monetary Stance and Benign Inflation
On Mar 20, after the completion of its two-day policy meeting of the Federal Open Market Committee, the central bank decided not to hike interest rate in 2019 unless the situation changes abruptly.
Moreover, benign inflation data is likely to bolster the market rally. On Mar 29, the Department of Commerce reported that the core (excluding food and energy components) personal consumption expenditures (PCE) price index rose 0.1% in January, less than the consensus estimate of an increase of 0.2%. The year-over-year rise in the PCE pride index was 1.8%, below the 2% target rate of the Fed.
On Mar 12, the Department of Labor reported that Consumer Price Index data for the month of February increased 0.2%. Year over year, the cost of living index has declined to 1.5%, its smallest since September 2016.
The two inflation indexes are currently below the Fed’s benchmark 2% level despite the fact that wage rate grew by 0.3% in both January and February.
5 Stocks Moving Higher
The recent concerns about global economic slowdown and temporary yield curve inversion have not stalled the market’s growth. We have been able to narrow down our search on five stocks, which have moved higher in the first quarter and still have upside left. All five stocks currently sport a Zacks Rank #1 (Strong Buy) and VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Insperity Inc. (NSP - Free Report) provides human resources and business solutions to enhance business performance for small and medium-sized businesses in the United States. Insperity looks strong on the back of a booming professional employer organization industry. The company offers a comprehensive suite of Workforce Optimization and Workforce Synchronization solutions.
The stock has surged 32.4% year to date. The company has an expected earnings growth rate of 22.4% for the current year. The Zacks Consensus Estimate for the current year improved 6.5% over the last 60 days.
Quanta Services Inc. (PWR - Free Report) provides specialty contracting services in the United States, Canada, Australia, Latin America and internationally. Quanta Services is pursuing a three-pronged growth strategy focusing on the timely delivery of projects to exceed customer expectation, leverage on the core business to expand in complementary adjacent service lines and continuation of exploring new service lines.
The stock has surged 25.4% year to date. The company has an expected earnings growth rate of 25.3% for the current year. The Zacks Consensus Estimate for the current year has improved 7.3% over the last 60 days.
Ralph Lauren Corp. (RL - Free Report) designs, markets, and distributes lifestyle products in North America, Europe, Asia and internationally. The company is now progressing well with its “Next Great Chapter” plan that was announced in June 2018. This strategic growth plan focuses on delivering sustainable long-term growth and value creation.
The stock has surged 25.3% year to date. The company has expected earnings growth rate of 16.8% for the current year. The Zacks Consensus Estimate for the current year has improved 3.7% over the last 60 days.
Terex Corp. (TEX - Free Report) manufactures and sells aerial work platforms, cranes, and materials processing machinery worldwide. The company is well placed to benefit from the continued implementation of Execute to Win initiatives in 2019. Terex’s Execute to Win strategy is focused on improving capabilities by investing in people, processes and tools in three priority areas, comprising commercial excellence, lifecycle solutions and strategic sourcing.
The stock has surged 16.5% year to date. The company has expected earnings growth rate of 41.3% for the current year. The Zacks Consensus Estimate for the current year has improved 9.7% over the last 60 days.
G-III Apparel Group Ltd. (GIII - Free Report) ) designs, sources, and markets women's and men's apparel in the United States and internationally. G-III Apparel’s wholesale segment is depicting a stellar show and driving the company’s overall performance. Sales in the category witnessed growth of 13% during the fourth quarter of 2018, driven by solid performance in DKNY, Tommy Hilfiger and Calvin Klein brands.
The stock has surged 43.2% year to date. The company has an expected earnings growth rate of 15.4% for the current year. The Zacks Consensus Estimate for the current year has improved 5.1% over the last 60 days.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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