Wall Street rebounded on Jul 31, led by a tech rally, as investors now strongly believe that the Federal Reserve will implement its first interest rate cut in September.
The S&P 500 1.6% to end at 5,522.30, while the Nasdaq rose 2.6% to close at 17,599.40. Both the indexes recorded their best session since February. The Dow also rose 0.2% to finish at 40,842.79 points.
The rebound came as the Federal Reserve, at the end of its two-day policy meeting, kept interest rates unchanged in the current range of 5.25-5.5%. A small section of market participants was hopeful that the Fed could start its interest rate cuts in July but that didn’t happen.
However, the Federal Reserve Chairman, in his first press conference after the end of the July FOMC meeting, said that if data gives central bank officials the confidence that inflation is easing steadily, it could start its easing cycle.
“If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September,” Powell said.
Inflation has declined substantially over the past couple of months after rising in the first quarter. The personal consumption expenditure (PCE) price index, the Fed’s key inflation gauge, rose 0.1% sequentially in June, which was in line with economists’ expectations.
Year over year, PCE rose 2.5% in June after increasing 2.6% in May. Core PCE inflation, which strips out the volatile food and energy prices, also rose 0.2% month over month in June and 2.6% year over year.
Also, the U.S. economy grew at an annualized rate of 2.8% in the second quarter, double the pace from the first quarter and sharply higher than economists’ expectations of a rise of 2%.
Market participants are now confident that the Federal Reserve will start its easing cycle with a 25-basis point rate cut in September followed by two more by the end of this year. Lower borrowing rates typically help growth-oriented assets like technology stocks. Moreover, tech stocks have been driving the market rally since 2023.
Given this scenario, it would be ideal to invest in mega-cap tech stocks such as Amazon.com, Inc. AMZN,Apple, Inc. AAPL, NVIDIA Corporation NVDA and Netflix, Inc. NFLX that have strong potential for 2024.
These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon.com, Inc. is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. AMZN’s online retail business revolves around the Prime program well-supported by the company’s massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish its footprint in the physical grocery supermarket space. AMZN also enjoys a dominant position in the cloud-computing market, particularly in the Infrastructure as a Service space, thanks to Amazon Web Services.
Amazon.com has an expected earnings growth rate of 58.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. AMZN currently carries a Zacks Rank #2.
Apple Inc.’s business primarily runs around its flagship iPhone. However, the Services portfolio of AAPL, which includes revenues from cloud services, the App store, Apple Music, AppleCare, Apple Pay, and licensing and other services, has now become the cash cow. Moreover, non-iPhone devices like Apple Watch and AirPod have gained significant traction.
Apple has an expected earnings growth rate of 7.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days. APPL currently has a Zacks Rank #2.
NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, NVDA’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms.
NVIDIA has an expected earnings growth rate of 106.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the last 30 days. NVDA presently carries a Zacks Rank #2.
Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 58.6%. The Zacks Consensus Estimate for the current-year earnings has improved 4.2% over the past 60 days. NFLX currently carries a Zacks Rank #2.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
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