S&P 500 Makes History, Steers Past 2500: Top 5 Gainers

The S&P 500, America’s dominant equity market index, powered past 2,500 for the first time on Sep 15, as the bull market rages on. The rally has been largely driven by a rebound in technology shares and rising bank stocks. Upbeat corporate earnings and a stable economic growth also continued to buoy investors’ sentiments.

The benchmark index is on a ‘breakout mode’ right now and even North Korea’s Kim Jong-un couldn’t stall the rally. Hurricane Irma, in the meantime, lost steam and investors chose to ignore, perhaps the largest ever Equifax (NYSE:EFX) data breach, and the earthquake in Mexico. Banking on such bullish trends, investing in sound stocks listed in the index will be judicious.

The S&P 500 Pushes Past 2,500

The S&P 500 index that flaunts some of the biggest companies on the planet including Apple Inc. (NASDAQ:AAPL) , Johnson & Johnson (NYSE:JNJ) and Exxon Mobil Corporation (NYSE:XOM) – began the day on the back foot but crawled back to end the trading session up 0.2% or 4.61 points higher at a record 2,500.23. The $21-trillion stock index also capped its biggest weekly advance since January. For the week, the S&P 500 rose 1.6%.

U.S. stocks have soared more in the past eight years than in any other post-World War II time of economic growth, as per the National Bureau of Economic Research. The S&P 500 surged 172% since bottoming in July 2009, when the economy was struck by the Great Recession. This means that if you had invested $10,000 in the benchmark index during the dark days, it would be worth around $27,000 today.

In fact, the index’s biggest gains were from April 1991 to March 2001, when Internet-related stocks moved north. The index also performed exceptionally well since Donald Trump was elected as the President. The S&P 500 posted a whopping $2.04 trillion in market value since Trump’s election last November, said Howard Silverblatt, senior Index analyst at S&P Dow Jones Indices.

Tech & Bank Stocks Propel Markets Higher

This time around, a rebound in technology shares and rally in bank stocks helped the S&P 500 achieve the milestone. Chipmakers gained traction, thanks to NVIDIA Corporation’s (NASDAQ:NVDA) 6.3% jump to a record high after Evercore ISI raised its price target on the stock to $250 from $180. The broader technology sector was boosted by Apple. The iPhone maker’s shares increased around 1%, its first gain since unveiling new iPhones on Sep 12.

U.S. consumer prices, in the meantime, rose 0.4% in August, its biggest one-month gain since January. This has pushed the year-over-year increase to 1.9% from 1.7% in July. Inflationary pressure firmed in August and brought an end to five successive months of soft data. With inflation gradually climbing to the Fed’s target level, expectations of a future rate hike strengthened. According to the CME Group (NASDAQ:CME), there is a 55% chance that the Fed will raise borrowing costs at its December meeting, up from 38% a week earlier.

Bank stocks gained on higher chances of an interest rate hike this month. Higher longer-term interest rates can boost bank profits as they increase the spread between what banks earn by funding longer-term assets, such as loans, with shorter-term liabilities.

Focus on Robust Fundamentals

Investors also continue to focus on corporate earnings that are expected to increase every year through at least 2019, while the economy continues to expand at a steady pace.

Healthy Corporate Earnings

Total Q3 earnings for the S&P 500 members are expected to increase 3.3% from the same period last year on 5% higher revenues.

For this year, total earnings for the S&P 500 members are expected to increase 8.1% on 5% higher revenues, which would follow a paltry 0.7% earnings growth on 2.1% higher revenues last year (read more: Q3 Earnings Season Gets Underway).

Solid Economic Growth

When it comes to economic growth, the U.S. GDP expanded 3% in the second quarter, the fastest rate of growth in more than two years. An uptick in consumer outlays and business investment gave the economy a boost. Increased spending on goods and services pushed consumer expenditure up 3.3% in the said quarter. Consumer spending – the biggest driver of an economy – picked up on higher income for consumers and low inflation.

Additionally, the Empire State factory gauge hit 24.4 this month, while the new orders component of the report came in strong, as it reached its highest point since October 2009. The NFIB small business optimism index too remained healthy with a reading of 105.3.

Political Ructions, Hurricane Fears Subside

Investors have more or less programmed themselves to ignore the North Korea tensions. The rogue nation fired a missile over Japan for the second time this month. North Korea defied efforts from global nations to force it to abandon its course. South Korea immediately responded by conducting a simulated strike on an air base near Pyongyang. The White House, in the meanwhile, wants the United Nations to impose an oil embargo on North Korea and at the same time freeze Kim Jong-un’s assets in response to his regime’s sixth nuclear test last week.

Wall Street also breathed a sigh of relief after hurricane Irma shifted its direction and eased fears of widespread devastation in Florida. Irma gradually lost strength once it made landfall on the Florida Keys on Sep 10 and was downgraded to a tropical storm.

5 Top S&P 500 Winners

Banking on such positives, we have selected five solid S&P 500 stocks that have not only gained significantly on Sep 15 but also have the scope of gaining further traction. These stocks sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also boost a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

Genworth Financial Inc (NYSE:GNW) provides mortgage insurance products that allow people to purchase homes. The company offers individual and group long-term care insurance products to meet consumer needs for long-term care. Genworth Financial has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings increased 8.8% over the last 60 days. The company gained 0.5% on Sep 15, while its expected growth rate for the current and the next quarters are 125.3% and 172.2%, respectively.

Signet Jewelers Ltd. (NYSE:SIG) is a retailer of diamond jewelry. The company has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings increased 6.7% over the last 60 days. The company gained 1.3% on Sep 15, while its expected growth rate for the next quarter is 11.6%.

Boeing Co (NYSE:BA) is an aerospace company. The company's segments include Commercial Airplanes; Defense, Space & Security (BDS), such as Boeing Military Aircraft (BMA), Network & Space Systems (N&SS) and Global Services & Support (GS&S), and Boeing Capital (BCC). Boeing has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings increased 6.1% over the last 60 days. The company gained 1.5% on Sep 15, while its expected growth rate for the next quarter is 14.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch Co. (NYSE:ANF) is a specialty retailer that primarily sells its products through store and direct-to-consumer operations, as well as through various wholesale, franchise and licensing arrangements. The company has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings increased 0.4% over the last 60 days. The company gained 1.2% on Sep 15, while its expected growth rate for the current and the next quarters are more than 100% and 11.8%, respectively.

Caterpillar Inc. (NYSE:CAT) is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company has a Zacks Rank #1 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings increased 20.8% over the last 60 days. The company gained 0.7% on Sep 15, while its expected growth rate for the current and the next quarters are 40.5% and nearly 47%, respectively.

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