5 High-Flying Stocks Poised To Beat On Earnings In Q2

Wall Street is northbound since the beginning of 2019 barring some fluctuations. After completing the best first half in more than two decades, all three major stock indexes -- the Dow, S&P 500 and Nasdaq Composite -- recorded their fresh all-time highs. Wall Street still has something to offer irrespective of the fact that the bull run is in its eleventh year.

Recessionary Fears Overblown

The U.S. economy is still growing albeit at a slow pace and consequently, possibility of a recession is nowhere near the current scenario. The labor market data for June is the latest example of the robustness of the domestic economy. The U.S. economy added a massive 224,000 jobs in June and 172,000 jobs per month on average in the first half of 2019.

Moreover, IHS Markit reported that U.S. manufacturing PMI rose 50.6 in June from 50.1 in May. Notably, the IHS Markit data of China, Eurozone, the U.K., Japan and Russia fell to below 50 in June, implying contraction in manufacturing activities. The Federal Reserve reported that U.S. industrial production increased by 0.4% in May, the highest in six months. Most importantly, the manufacturing sector registered growth of 0.2%, marking its first monthly gain in 2019.

Additionally, the Department of Commerce reported that core durable goods order –- a key metric to track business investment plan –- jumped 0.4% in January after witnessing a sharp fall in the previous three months. Notably, business investment in the 12 months ended May rose to 1.4% from 1.2% in April.

A Dovish Fed

A dovish stance taken by the Fed since the beginning of this year is considered as a major boost to the U.S. economy. So far, the central bank has kept its benchmark leading rate at 2.25-2.5%, and has hinted at rate cuts this year itself.

On Jun 19, in his speech following the FOMC meeting, Fed chair Jerome Powell removed the term “patient" from the minutes and added that “the FOMC will closely monitor the implications of the incoming information for economic outlook and will act as appropriate to sustain the expansion." Investors are considering a rate cut at least by 25 basis points in July and one or two more cuts the rest of this year.

Trade Negotiations Restart

On Jun 29, Presidents Trump and Xi agreed to restart trade negotiations in a meeting at the G-20 summit. Both sides have decided to hold off from imposing further tariffs for the time being. Moreover, the U.S. government has decided to ease some restrictions on Chinese telecom behemoth Huawei.

The Trump administration has decided to allow U.S. tech companies to sell products that will not harm U.S. national security to Huawei. On the other hand, China has agreed to increase the import of U.S. farm products to a considerable extent.

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Consequently, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Chinese Vice Premier Liu He and Commerce Minister Zhong Shan on Jul 9. This was the first face-to-face meeting between the high-level delegations of the two countries after the trade negotiation abruptly broke down on May 5.

Our Top Picks

At this stage, it will be prudent to invest in stocks with a favorable Zacks Rank that skyrocketed in the past three months, despite severe market volatility, and are poised to beat second-quarter earnings estimates. We have narrowed down our search to five such stocks, each sporting a Zacks Rank #2 (Buy) and having a positive Zacks Investment Research

Written By: Zacks Investment Research