Wall Street Likely To Sustain Post-Midterm Rally: 5 Picks

Following a jolt in October, Wall Street has been in recovery mode since the beginning of November. This recovery gained a boost on Nov 7, as U.S. stocks rallied following the declaration of midterm Congressional election results. In fact, investors’ optimism has been revived on risky assets like equities with a divided U.S. Congress where Republicans have strengthened hold on the Senate while Democrats regained control of the House of Representatives after eight years.

Wall Street bull run is likely to continue in the rest of 2018 as holiday sales season is approaching. Consequently, it will be prudent to invest in stocks from industries like infrastructure, construction, healthcare and technologies with a favorable Zacks Rank.

Is Divided Congress Good for Investors?

Some analysts are also optimistic about Trump’s earlier comment that he is willing to co-operate with Democrats for some of the core Democratic issues like price control on pharmaceuticals, increased spending on infrastructure projects and middle-class tax cut. Democrats are also likely to co-operate with Trump administration regarding higher defense spending on 2019.

However, much will depend on Trump’s attitude as he already warned Democrats of a “warlike situation" if they choose to launch investigations into his administration.

Investors Welcome Midterm Election Results

On Nov 7, all three major stock indexes rallied as the picture of a divided U.S. Congress became clear. The Dow jumped 545.29 points or 2.1% to 26,180.30. The S&P 500 soared 58.44 points or 2.1% to 2,813.89. Meanwhile, Nasdaq Composite surged 194.79 points or 2.6% to 7.570.75.

Notably, Wednesday marked biggest single-day climb for both the Dow and Nasdaq since Oct 16, while the S&P 500 recorded its biggest single-day gain since Oct 25. Moreover, the Dow and S&P 500 posted their largest after mid-term election gain since 1982.

Bull Run Likely to Continue

The Wall Street bull-run is likely to continue buoyed by a strong U.S. economy. The U.S. GDP’s increased 3.3% in the first nine months of 2018, surpassing the target of 3% set by President Trump.

The U.S. consumer confidence index for October was pegged at 137.9, the highest reading since September 2000. The future expectations index — reflecting what Americans think the economy will look like in the next six months — increased to 114.6 from 112.5, signaling strong growth at least up to first quarter of 2019.

Moreover, The National Retail Federation projected that holiday retail sales (excluding automobiles, gasoline and restaurants), will jump between 4.3% to 4.8% this year. Total sales could climb as high as $720.89 billion.

Our Top Picks

At this stage, investment in stocks of infrastructure, construction, healthcare and technologies industries will be lucrative. We have narrowed our search on five such stocks with a Zacks Rank #1 (Strong Buy) and strong growth potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below depicts price performance of our five picks in the last six months.

DXP Enterprises Inc. (DXPE engages in distributing maintenance, repair, and operating products, equipment, and services to energy and industrial customers in the United States. The company has expected earnings growth of 97.7% for current year. The Zacks Consensus Estimate for the current year has improved by 13.3% over the last 30 days.

Bristol-Myers Squibb Co. (NYSE:BMY) discovers, develops, licenses, manufactures, markets, and distributes biopharmaceutical products worldwide. The company has expected earnings growth of 27.6% for current year. The Zacks Consensus Estimate for the current year has improved by 5.8% over the last 30 days.

EnPro Industries Inc. (NYSE:NPO) is a diversified manufacturer of proprietary engineered products used in critical applications. The company has expected earnings growth of 62.6% for current year. The Zacks Consensus Estimate for the current year has improved by 5.9% over the last 30 days.

Illumina Inc. (NASDAQ:ILMN) is a global leader in DNA sequencing and array-based technologies, serving customers in the research, clinical and applied markets. The company has expected earnings growth of 43% for current year. The Zacks Consensus Estimate for the current year has improved by 4.8% over the last 30 days.

NetApp Inc. (NASDAQ:NTAP) provides software, systems, and services to manage and share date on-premises, and private and public clouds worldwide. The company has expected earnings growth of 27.7% for current year. The Zacks Consensus Estimate for the current year has improved by 1.6% over the last 30 days.

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