November turned out to be the best month of the year for Wall Street as stocks rallied on investor optimism that the Federal Reserve may be done with its interest rate hikes. The Dow and the S&P 500 rose 8.9% each for November while the Nasdaq gained 10.7% for the month.
Experts believe that the rally will continue through the year-end given the high chances that the Fed may not go for another rate hike in its December policy meeting.
The renewed vigor comes as the U.S. economy grew 5.2% in the third quarter at a seasonally adjusted annual rate, up from the earlier reported 4.9% and well above the consensus estimate of 5%.
Also, inflation continued to ease in October. The Commerce Department reported on Nov 30 that personal consumption expenditure (PCE) was unchanged in October, while the core PCE index rose a meager 0.2%.
Year over year, core PCE, which excludes the volatile food and energy prices, rose 3.5% in October compared to a rise of 3.7% in September.
Easing inflation has raised hopes that the Fed may be done with its monetary tightening campaign after having raised interest rates by 525 basis points since March 2022.
Dovish comments from several Fed officials that the economy may have a softer landing as inflation may steadily ease to 2% over time also led to optimism among investors.
Market participants are now expecting a 76% chance that the central bank will go for a 25-basis point rate cut in May 2023, according to the CME FedWatch tool.
The fresh optimism is also boosting consumer confidence, which rose to 102 in November, beating estimates of 101 and coming in well above October’s downwardly revised reading of 99.1. This was the first jump in consumer confidence in the past three months.
Given this scenario, investors should invest in consumer discretionary stocks like DoubleDown Interactive Co., Ltd. DDI, Grand Canyon Education, Inc. LOPE, Royal Caribbean Cruises Ltd. RCL, Live Nation Entertainment, Inc. LYV and Comcast Corporation CMCSA.
DoubleDown Interactive Co., Ltd. is a developer and publisher of digital social casino games. DDI is based in Seattle.
DoubleDown Interactive’s expected earnings growth rate for the current year is 334.8%. The Zacks Consensus Estimate for current-year earnings has improved 9.3% over the past 60 days. DDI currently sports a Zacks Rank #1 (Strong Buy).
Grand Canyon Education, Inc. is a regionally accredited provider of online postsecondary education services focused on offering graduate and undergraduate degree programs in its core disciplines of education, business and healthcare. In addition to its online programs, LOPE offers programs at its traditional campus in Phoenix, AZ and onsite at the facilities of employers.
Grand Canyon Education’sexpected earnings growth rate for the current year is 17.1%. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the past 60 days. LOPE presently carries a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises' brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
Royal Caribbean Cruises' expected earnings growth rate for the current year is 187.9%. The Zacks Consensus Estimate for current-year earnings has improved 7.3% over the past 90 days. RCL currently has a Zacks Rank #2.
Live Nation Entertainment, Inc. operates as a live entertainment company. LYV operates through the Concerts, Ticketing, and Sponsorship and Advertising segments. Live Nation Entertainment has more than 580 million fans across all of its concerts and ticketing platforms in 46 countries.
Live Nation Entertainment’s expected earnings growth rate for the current year is 132.8%. The Zacks Consensus Estimate for current-year earnings has improved 47.5% over the past 60 days. LYV presently has a Zacks Rank #2.
Comcast Corporationi s a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal and Sky. Beginning first-quarter 2023, CMCSA changed its presentation of segment operating results around its two primary businesses, Connectivity & Platforms, and Content & Experiences.
Comcast Corporation’s expected earnings growth rate for the current year is 8%. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the past 60 days. CMCSA presently carries a Zacks Rank #2.
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