Wall Street is likely to close in the green in November after a solid September and October. The stock market’s impressive bull run is likely to continue in the near term supported by a dovish Fed, which already cut the benchmark rate by 75 basis points, expectation of a partial trade deal between the United States and China this year and strong expectations for the upcoming holiday session.
These positives strengthened investors’ confidence in risky assets like equities. Despite last week’s fluctuations, moth to date, the three major stock indexes — the Dow, the S&P 500 and Nasdaq Composite — have gained 3.8%, 3.2% and 4.1%, respectively.
Let us discuss the likely three major growth drivers of stock markets for the rest of 2019.
Positive Development on Trade War Front
On Nov 23, U.S. national security adviser Robert O’Brien said that an initial trade agreement with China is still possible by the end of the year. On Nov 26, Chinese vice premier Liu He, country’s top negotiator on trade, had a telephonic discussion with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin regarding further discussion. The report was confirmed by the China’s Ministry of Commerce.
Notably, on Nov 20, Reuters reported citing people close to the White House that completion of a phase one U.S.-China trade deal could be delayed till next year. The Wall Street Journal also reported that the Trump administration’s desire to sign a partial trade deal with China may not be fruitful this year citing former administration officials and others sources in the White House.
Meanwhile, on Nov 24, the Chinese government released a document supporting more protection of intellectual property rights (IPR). Notably, protection of U.S. intellectual properties, especially for high-tech products and termination of forced technology transfer by the Chinese government were the primary issues of the U.S.-China trade conflict.
Fed Adopts Stable Monetary Policy
After keeping interest rate stable in the first half of 2019, the Fed was compelled to reduce it in three consecutive and equal tranches of 25 basis points to sustain the expansion of the U.S. economy amid heightened trade conflict with China, global economic slowdown and slowing pace of U.S. economic growth, particularly contraction in business spending.
However, in his latest policy statement, Fed chair Jerome Powell clearly indicated the end of a mid-cycle (insurance cut) monetary policy adjustment. At the same time, the Fed Chair has also assured market participants that the central bank will not consider a rate hike until there is a sustained and significant uptick in the inflation rate.
Strong Expectations of Holiday Sales
U.S. holiday retail sales are likely to jump 3.8% year over year to $1.008 trillion this year, the first ever trillion-dollar holiday season, per research firm eMarketer. In-store sales will increase 2.5% to $872.25 billion during the holiday season compared to last year, while e-commerce sales will climb 13.2% to $135.35 billion.
Meanwhile, U.S. retailers are gearing up for the holiday season, starting late November and stretching until early January. According to the National Retail Federation (NRF), holiday retail sales — excluding restaurants, automobile dealers and gasoline stations — are projected to rise 3.8% to 4.2% year over year to a total of $727.9 billion to $730.7 billion.
Our Top Picks
At this stage, it will be prudent to invest in growth stocks with a favorable Zacks Rank. We have narrowed down our search to five growth stocks, with strong EPS estimate revision and future growth potential, that popped in November. Each of our picks carries a Growth Score of A and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DexCom Inc. (DXCM - Free Report) is a medical device company, focusing on the design, development, and commercialization of continuous glucose monitoring systems in the United States and internationally. The company has an expected earnings growth rate of 33.3% for the current quarter. The Zacks Consensus Estimate for the current quarter has improved 5.9% over the last 30 days. The stock has jumped 49.6% in the past month.
Forterra Inc. (FRTA - Free Report) manufactures and sells pipe and precast products the United States, Canada and Mexico. It operates through Drainage Pipe & Products, and Water Pipe & Products segments. The company has an expected earnings growth rate of 59.3% for the current quarter. The Zacks Consensus Estimate for the current quarter has improved 38.9% over the last 30 days. The stock has soared 34.6% in the past month.
NeoPhotonics Corp. (NPTN - Free Report) is engaged in the design and manufacture of photonic integrated circuit-based modules and subsystems for bandwidth-intensive, high-speed communications networks. The company has an expected earnings growth rate of 100% for the current quarter. The Zacks Consensus Estimate for the current quarter has improved 150% over the last 30 days. The stock has soared 34.4% in the past month.
Ironwood Pharmaceuticals Inc. (IRWD - Free Report) is focused on the development and commercialization of treatments primarily addressing gastrointestinal diseases. The company has an expected earnings growth rate of 1,200% for the current quarter. The Zacks Consensus Estimate for the current quarter has improved 57.1% over the last 30 days. The stock has surged 29.9% in the past month.
Cardtronics plc (CATM - Free Report) provides ATM services primarily in North America and Europe. It is at the convergence of retailers, financial institutions, prepaid card programs and customers they share. The company has an expected earnings growth rate of 23.4% for the current quarter. The Zacks Consensus Estimate for the current quarter has improved 1.7% over the last 30 days. The stock has surged 19.9% in the past month.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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