S&P 500 Closes Above 2,800 After Nearly 4 Months: 5 Picks

The S&P 500 — popularly known as the benchmark index of U.S. stock markets — has been performing impressively so far in 2019. On Mar 1, the broad-market index closed at 2,800 — a key technical barrier — for the first time since Nov 8, 2018.

A likely agreement between the United States and China on the trade war front, the Fed’s dovish monetary stance, and rebound in oil prices and technology sector acted as primary catalysts behind the stock market rally. Consequently, it will be prudent to invest in S&P 500 stocks with a favorable Zacks Rank.

S&P 500 Rally Continues

The last year was extremely disappointing for the S&P 500. The index plunged 6.2% recording its worst ever yearly performance since 2008. However, the S&P 500 started 2019 on a strong note. For the week ended Mar 1, the S&P 500 rose 0.4%, reflecting its fifth straight weekly gains. The benchmark index has witnessed growth in 9 out of last 10 weeks. Year to date, the broad-market index is up 11.8%.

Notably, 2,800 is a key technical barrier for the S&P 500. Since the beginning of 2018, the index has entered this zone for 11 times but has been unable to hold the position. However, if the index can firmly break 2,800, it will act as a support for the S&P 500 and pave the way for the index’s long-term upside potential.

US-China Inching Toward Trade Deal

On Feb 28, Bloomberg reported that the U.S. officials are preparing a 150-page trade deal that President Donald Trump and his Chinese counterpart Xi Jinping are likely to sign by mid-March. However, U.S. officials are still debating whether China can be forced to provide more concessions especially related to intellectual properties of high-tech products.

On Mar 2, The Wall Street Journal reported that President Trump and Xi Jinping could sign a trade deal in a summit meeting scheduled to be held around Mar 27. Earlier, the United States refrained from hiking tariff rate from 10% to 25% on $200 billing of Chinses goods while China pledged to increase imports from the United States to $1.2 trillion by 2024.
Fed to Remain Patient Regarding Monetary Policy

Second, on Feb 27, in his testimony before the House Committee, Fed Chair Jerome Powell said that the central bank will not downsize its $4 trillion balance sheet this year. Powell also added that while the U.S. economy is currently in good shape, it may face headwinds from global economic slowdown. Consequently, the Fed will maintain its dovish monetary stance at least for the time being. On Jan 30, the Federal Reserve decided to keep the federal funds target rate unchanged in the range of 2.25% - 2.50%.

Rebound in Oil Prices and Technology Stocks

On Mar 1, the U.S. benchmark West Texas Intermediate (WTI) closed at $56.08 a barrel while the global benchmark Brent crude closed at $65.39 a barrel. Year to date, these benchmark prices are up 26.1% and 27%, respectively. Rebound in oil prices took place due to significant supply cut by OPEC and imposition of U.S. sanctions on Iran and Venezuela.

The technology sector suffered severe setback in 2018. Technology Select Sector SPDR (XLK) declined 2.9% last year. The tech-laden Nasdaq Composite plunged 3.9% in 2018. However, XLK and Nasdaq Composite are up 15.1% and 14.5%, respectively, year to date. The primary reason behind tech sector recovery can be attributed to positive developments on trade war front.

Our Top Picks

At this stage, it will be a prudent move to invest in S&P 500 stocks. We have narrowed down our search to five such stocks. Each of our picks sport a Zacks Rank #1 (Strong Buy) and provide more than 20% return year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Boeing Co. (NYSE:BA) designs, develops, manufactures, sales, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems worldwide. The company delivered average positive earnings surprise of 17.1% in the last four quarters. Year to date, the stock has gained 31.5%. The company has expected earnings growth of 25.7% for the current year. The Zacks Consensus Estimate for the current year has improved 11.3% over the past 60 days.

Xilinx Inc. (NASDAQ:XLNX) designs and develops programmable devices and associated technologies worldwide. The company recorded average positive earnings surprise of 5.7% in the last four quarters. Year to date, the stock has rallied 44.1%. The company has expected earnings growth of 23.3% for the current year. The Zacks Consensus Estimate for the current year has improved 6.1% over the past 60 days.

Celgene Corp. (NASDAQ:CELG) discovers, develops, and commercializes therapies for the treatment of cancer and inflammatory diseases worldwide. The company delivered average positive earnings surprise of 2.7% in the last four quarters. Year to date, the stock has gained 39.1%. The company has expected earnings growth of 21.2% for the current year. The Zacks Consensus Estimate for the current year has improved 5.3% over the past 60 days.

Arista Networks Inc. (NYSE:ANET) develops, markets, and sells cloud networking solutions in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. The company recorded average positive earnings surprise of 11.4% in the last four quarters. Year to date, the stock has rallied 30.5%. The company has expected earnings growth of 23.3% for the current year. The Zacks Consensus Estimate for the current year has improved 3.8% over the past 60 days.

Fortinet Inc. (NASDAQ:FTNT) provides broad, automated, and integrated cybersecurity solutions worldwide. The company recorded average positive earnings surprise of 18.8% in the last four quarters. Year to date, the stock has rallied 23.2%. The company has expected earnings growth of 12.5% for the current year. The Zacks Consensus Estimate for the current year has improved 4% over the past 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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