5 Top Stocks To Buy During This Bull & Bear Tug-of-War
Zacks Investment Research | Feb 06, 2018 10:04PM ET
Wall Street is bracing for higher bouts of volatility, after a rebound in U.S. stocks on Feb 6 followed the largest sell-off in more than six years. While bullish investors show a lot of optimism on corporate earnings and prospects of tax cut, those with a bearish view fear that the Fed’s embarking on a quicker route to interest rate hikes might derail the record bull run.
Given such widespread concern over the future course of the equity market, investing in stocks unperturbed by market gyrations won’t be a bad proposition.
Greater Uncertainty in Equity Market
The U.S. stock market finished a wild day of trading on Feb 6 with the Dow jumping 567.02 points, or 2.3%, to 24,912.77, after losing 567 points at the open. This followed Feb 5’s brutal trading session, with the Dow nosediving around 1,600 points as investors pulled money out of stocks.
The S&P 500 bounced back to close at 2,695.14, up 46.20 points, or 1.7%. But, the broader index is now down more than 5% from its all-time intra-day high of 2,872.87 on Jan 26. And it’s all because of the healthy pullback on Feb 5. Before that day, the index had enjoyed the longest stretch without a 5% pullback in 20 years.
This shows that the market is unpredictable and often erratic in the short term. After all, the Cboe Volatility Index (VIX), Wall Street’s so-called fear gauge, at one point of time climbed as high as 49 on Feb 6, topping 40 for the first time since 2015, only to end at 31.3. Any reading above the 20 mark indicates volatility in the equity market. This is in sharp contrast to the fear gauge’s reading in 2017. Last year, VIX fell as low as 9.14.
Roller-Coaster Ride for Investors
The wild swings over the past two days are due to the constant tussle between bulls and bears. Bullish investors argue that at the end of the day, upbeat corporate earnings and the Republican tax cut policy will support market valuations.
Total Q4 earnings for the 251 S&P 500 members that have reported results so far are up 16% from the same period last year on 10.5% higher revenues, with 80.5% beating EPS estimates and 78.1% surpassing revenue estimates. Overall, Q4 earnings are expected to be up 13% from the same period last year on 7.7% higher revenues (read more: Zacks Investment Research
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