The abrupt breakdown of the U.S.-China trade negotiation has stalled Wall Street’s record-breaking bull run, which continued for the first four months of this year. All three major stock indexes --- the Dow, S&P 500 and Nasdaq Composite --- lost a good chunk of value, which they had recovered after a disappointing 2018.
However, not all stocks are suffering the market mayhem. Some stocks within these three indexes have strong year-to-date returns and still hold strong momentum. Investment in some such stocks that also flaunt a favorable Zacks Rank should prove to be lucrative.
Major Indexes Still in Green Despite Volatility
Volatility crept into Wall Street when trade talks between the United States and China broke down on May 5. Consequently, the Dow, the S&P 500 and the Nasdaq Composite have tumbled between 5.5-6% in May. Despite this significant fall, the Dow, the S&P 500 and the Nasdaq Composite are still up 7.7%, 11% and 13.8%, respectively.
Trade Conflict Deepens
So far, the U.S. government has imposed 25% tariffs on $250 billion Chinese goods while China has retaliated with 25% tariff on $170 billion of U.S. exports. It does not stop there. President Trump has expressed his desire to levy 25% tariff on another $325 billion Chinese products, which many industry watchers see as coming later this year or early next year.
Additionally, on May 15, the Trump administration blacklisted Chinese behemoth Huawei Technologies from doing business with U.S. counterparts. As a retaliatory move, China has decided to stop exporting rare earth minerals to the United States.
These are crucial inputs for developing high-tech products like smartphones, computer memory chips and rechargeable batteries as well as defense-related aerospace products. China has a near monopoly of producing these minerals and almost 80% of these minerals are exported by China to the United States.
U.S Economic Fundamentals Remain Strong
For May 2019, the Conference Board's measure of consumer confidence index stands at 134.1 compared with 129.2 in April. May’s reading is near the 18-year high recorded in November 2018. This indicates that U.S. consumers are highly confident about future growth despite trade concerns.
On May 3, the Department of Labor reported that the U.S. economy added 263,000 jobs in April. Year to date, job gains are an impressive 205,000 an average per month. Unemployment fell to 3.6% compared with the consensus estimate of 3.8%. This marks the lowest level of unemployment since December 1969.
The Philadelphia Fed manufacturing index came in at 16.6 in May, a massive gain from the reading of 8.5 in April. The index was the highest in four months in May. Notably, any reading above zero indicates improving conditions. The employment index grew to 18.2, the highest in five months. The prices index was at 17.5, the lowest in 17 months.
Our Top Picks
At this stage, investment in stocks that are members of any of these major stock indexes with strong growth potential will be prudent. We have been able to narrow down our search to five tech stocks, which have moved higher year to date and still have upside left. All five stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Great Lakes Dredge & Dock Corp. (GLDD - Free Report) provides dredging services in the United States and globally. The company is involved in capital dredging that consists of port expansion projects, coastal restoration and land reclamations, trench digging for pipelines, tunnels and cables, and other dredging related to the construction of breakwaters, jetties, canals and other marine structures.
The company has expected earnings growth of 300% for the current year. The Zacks Consensus Estimate for the current year has improved by 47.8% over the last 60 days. The stock has surged 60% year to date.
j2 Global Inc. (JCOM - Free Report) provides Internet services worldwide. It operates through three segments: Fax and Email Marketing; Voice, Backup, and Security; and Digital Media. The company offers cloud services to sole proprietors, small to medium-sized businesses and enterprises, and government organizations.
The company has expected earnings growth of 11% for the current year. The Zacks Consensus Estimate for the current year has improved by 4.1% over the last 60 days. The stock has surged 20.4% year to date.
H&E Equipment Services Inc. (HEES - Free Report) is one of the largest integrated equipment services companies in the United States with full-service facilities throughout the Intermountain, Southwest, Gulf Coast & Southeast regions of the United States. It operates in five segments: Equipment Rentals, New Equipment Sales, Used Equipment Sales, Parts Sales, and Repair and Maintenance Services.
The company has expected earnings growth of 16.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 7.8% over the last 60 days. The stock has surged 24.7% year to date.
OSI Systems Inc. (OSIS - Free Report) is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, healthcare, defense and aerospace industries. Its Security segment offers baggage and parcel inspection, cargo and vehicle inspection, hold baggage and people screening, radiation detection, and explosive and narcotics trace detection systems.
The company has expected earnings growth of 16.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 5% over the last 60 days. The stock has gained 41% year to date.
Hibbett Sports Inc. (HIBB - Free Report) engages in the retail of athletic-inspired fashion products through its stores. The company’s stores offer a range of merchandise, including athletic footwear, athletic and fashion apparel, sports equipment, and related accessories. It also operates hibbett.com and citygear.com e-commerce websites.
The company has expected earnings growth of 14.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 8% over the last 60 days. The stock has surged 59.8% year to date.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>