Buy 5 High-Flying Stocks Ahead Of Q2 Earnings This Week

Wall Street is on a dream run since the beginning of this year, resulting in a complete turnaround from a disappointing 2018. 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 11th year.

Meanwhile, a strong signal given by the Fed for rate cut in July and some recent tweets by President Donald Trump hinting at pursuing a weak U.S. dollar stance in order to increase competitiveness of U.S. exports may act as near-term catalysts for stock markets.

Investors Speculating on Fed’s Rate Cut

Although Fed Chair Jerome Powell has already given a strong signal of rate cut in the upcoming Federal Open Market Committee (FOMC) meeting scheduled Jul 30-31, market participants are guessing up to how much percentage point the Fed can lower the benchmark lending rate, which is currently pegged at 2.25-2.5%.

Investors’ hope for a 50 basis-point cut in interest rate gained momentum on Jul 18 after New York Federal Reserve President John Williams (NYSE:WMB) said, “It’s better to take preventative measures than to wait for disaster to unfold.” Later that day, Fed Vice Chair Richard Clarida said on Fox Business News that cutting interest rates quickly would be a good strategy.

However, a spokesperson for the New York Fed later clarified at CNBC that Williams was drawing from academic research, not hinting at potential policy actions at the upcoming FOMC meeting. As of Jul 22, CME FedWatch tool assigned 75.5% probability for a quarter percentage cut in benchmark interest rate in July while 24.5% respondents are optimistic of a half a percentage rate cut.

Will Trump Weaken U.S. Dollar?

Since the beginning of 2019, President Donald Trump is blaming the Fed for its aggressive monetary policy of hiking interest rate, which acted as a major hindrance to realize maximum benefits from fiscal initiatives taken by his administration.

On Jul 3, Trump tweeted that the European Union and China are adopting a dovish monetary stance and rate cut to make their currencies cheap in the international market. Moreover, on Jul 17, the IMF remarked that the U.S. dollar is currently overvalued by 6% to 12%, based on near-term economic fundamentals. IMF’s comment is in line with President Trump, who is frequently blaming dollar strength for the currency’s loss of competitiveness in the international market.

Several Wall Street analysts have said that there are some chances that the Trump administration might intervene like selling dollar and buying other currencies in order to reduce the U.S. dollar’s value. The sentiment was echoed by the National Economic Council Director Larry Kudlow as he said “we want a stable dollar,” not a stronger dollar.

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Our Top Picks

At this stage, it will be prudent to invest in stocks that are likely to beat earnings estimates in the second quarter. We have narrowed down our search to five such stocks that have skyrocketed year to date despite volatility and still have upside left. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Zacks Investment Research

Written By: Zacks Investment Research