Wall Street Rally Gathers Steam in February: 5 Top Picks

Nalak Das

After tumultuous 2018, Wall Street rebounded in January 2019. The stock market has rallied further in February buoyed by positive developments on the United States-China trade war front and temporary deal between the Republicans and Democrats to avert government shutdown again.

Moreover, the US economy remains strong as evident from strong manufacturing and labor market data for January. All these catalysts are likely to fuel stock market rally further. Consequently, it will be prudent to invest in stocks which are components of any of the three major stock indexes with a favorable Zacks Rank.

Wall Street Rally Continues

On Feb 13, all three major stock indexes – the Dow, S&P 500 and Nasdaq Composite – closed at highest level of 2019 so far. The Dow continued its winning run for two-straight days with a gain of nearly 490 points to close at 25,543.27. Year to date, the blue-chip index is up 9.5%.

Both the S&P 500 and Nasdaq Composite rallied for four consecutive days. On Feb 12, the S&P closed above its 200-day moving average for the first time since Dec 3, 2018. This was a key technical barrier indicating the benchmark index’s upside potential in the near future. Year to date, the broad-market index is up 9.8%.

The tech heavy Nasdaq Composite closed at 7,420.38 inching toward breaking its bear market territory at 7,431.50. Year to date, the index is up 11.8%.

Expectations of Positive Outcome From Trade Talks

Trade negotiations between the United States and China entered the third day on Feb 13. Both the countries are hopeful that this fresh round of negotiations would result in an amicable solution to the ongoing tariff war.

While such discussions have been termed as only working-level, U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer are expected in Beijing on Feb 14 for the next level of talks. Investors are also optimistic regarding these negotiations.

Meanwhile, on Feb 12, President Donald Trump said that he would consider extending the deadline of the current trade truce period which will come to an end on Mar 1. On Feb 13, South China Morning Post reported that Chinese President Xi Jinping is likely to meet high-level U.S. trade delegation on Feb 15 to resolve this 11 month old tariff related problem.

Temporary Deal Helps Avert Government Shutdown

On Feb 12, Republican as well Democrat Congressional leaders reached a joint agreement to allow funding for barriers along the U.S. - Mexico border. This has prevented another government shutdown. The Republicans agreed to far less an amount than initially demanded in a bid to avoid a shutdown. A sum of $1.4 billion was approved by Congress for building 55 miles of new fencing instead of a concrete wall.

President Trump had demanded $5.7 billion for the construction of a 215-mile-long concrete border across the border. Speaking from the White House, Trump stated, "I can't say I'm happy. I can't say I'm thrilled." Even though the deal has temporarily been approved, it is still pending Trump’s agreement. As a matter of fact, Trump has not stated he will reject the proposal. However, on Feb 13, Trump said “I don’t think you’re going to see a shutdown.” President’s statement significantly bolstered market sentiments.  

Out Top Picks

At this stage, it will be lucrative to invest in stocks that are components of any of the three major stock indexes – the Dow, S&P 500 and Nasdaq Composite – with strong growth potential. We have narrowed down our search to five such stocks carrying a Zacks Rank #1 (Strong Buy). 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 three months.

Xilinx Inc. XLNX: The company generated positive earnings surprise of 5.7% in the last four quarters. It has expected earnings growth of 23.3% for current year. The Zacks Consensus Estimate for the current year has improved by 6.1% over the last 30 days.

The Boeing Co. BA: The company generated positive earnings surprise of 17.1% in the last four quarters. It has expected earnings growth of 18.1% for current year. The Zacks Consensus Estimate for the current year has improved by 8.4% over the last 30 days.

Celgene Corp. CELG: The company generated positive earnings surprise of 2.7% in the last four quarters. It has expected earnings growth of 20.5% for current year. The Zacks Consensus Estimate for the current year has improved by 3.4% over the last 30 days.

Starbucks Corp. SBUX: The company generated positive earnings surprise of 6% in the last four quarters. It has expected earnings growth of 12% for current year. The Zacks Consensus Estimate for the current year has improved by 2.7% over the last 30 days.

Fortinet Inc. FTNT: The company generated positive earnings surprise of 18.8% in the last four quarters. It has expected earnings growth of 12.5% for current year. The Zacks Consensus Estimate for the current year has improved by 4% over the last 30 days.

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Fortinet, Inc. (FTNT) : Free Stock Analysis Report
 
The Boeing Company (BA) : Free Stock Analysis Report
 
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