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Easing Banking Fears, Rate Hike Pause Boost Markets: 5 Picks

Market sentiment took a beating all through March after a crisis broke out in the banking sector due to the collapse of the Silicon Valley Bank. The lender’s pursuit to raise fresh capital was crushed following run-on deposits.

Investors panicked that this may lead to a broader financial contagion, with more depositors pulling money out of their banks. At the same time, fears of a bank run forced lenders to stop providing loans and issue fewer mortgages, raising the threat of an imminent economic cooldown.

However, the stress in the banking sector somewhat eased this week and helped the major bourses scale upward. The recent closure of the Silicon Valley Bank raised hopes that the risk of contagion has been limited. The First Citizens BancShares agreed to acquire the Silicon Valley Bank’s $72 billion assets, per the Federal Deposit Insurance Corporation (“FDIC”).

To top it, the banking regulators assured depositors of the failed Silicon Valley Bank that they will have access to their deposits, thereby curbing a systematic contagion fear among depositors of other regional banks. The FDIC’s deposit insurance fund aims to cover both insured and uninsured depositors of the Silicon Valley Bank.

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Meanwhile, the Federal Reserve has established a new Bank Term Funding Program that aims to protect banks in times of emergencies. The Fed will allow banks to take loans for up to one year by pledging mortgage-backed securities.

FDIC Chair Martin Gruenberg, Treasury Secretary Janet Yellen, and Fed Chair Jerome Powell assured that the federal government has taken all the necessary steps to strengthen the banking system and that policymakers have the means to tackle any bank meltdown.

But it’s not just easing concerns in the banking sector that lifted the broader stock market lately. The Fed’s intention to press the pause button on interest rate hikes also improved sentiment further. The Fed officials may have raised interest rates by 25 basis points in their last meeting, but the CME Group’s FedWatch tool noted that almost 59.5% of market pundits expect no rate hike in May.

Needless to say, a rise in interest rates hamper economic growth by curtailing consumer outlays and increasing borrowing costs. Nonetheless, with banking fears easing and rate-hike pause hopes growing, the stock market is well-poised to move northward. Given such positives, it’s prudent for investors to place their bets on growth stocks.

We have, therefore, highlighted five stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and have a Growth Score of A or B, a combination that offers the best opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 stocks here.

Blue Bird BLBD is engaged in the designing, engineering, manufacturing and sale of school buses and related parts. BLBD has a Zacks Rank #2 and a Growth Score of A.

The Zacks Consensus Estimate for its current-year earnings has moved up 31.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 140%.

Comfort Systems USA FIX is a national provider of comprehensive heating, ventilation and air conditioning installation, as well as maintenance, repair and replacement services. FIX has a Zacks Rank #1 and a Growth Score of B.

The Zacks Consensus Estimate for its current-year earnings has moved up 5.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 20%.

Salesforce CRM is the leading provider of on-demand Customer Relationship Management software. CRM has a Zacks Rank #1 and a Growth Score of B.

The Zacks Consensus Estimate for its current-year earnings has moved up 23.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 35.7%.

Deckers Outdoor DECK is a leading designer, producer and brand manager of innovative, niche footwear and accessories. DECK has a Zacks Rank #2 and a Growth Score of A.

The Zacks Consensus Estimate for its current-year earnings has moved up 1.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 13.6%.

Magenta Therapeutics MGTA is a clinical-stage biotechnology company. MGTA has a Zacks Rank #2 and a Growth Score of B.

The Zacks Consensus Estimate for its current-year earnings has moved up 1.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 5.4%.

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Salesforce Inc. (CRM) : Free Stock Analysis Report

Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report

Comfort Systems USA, Inc. (FIX) : Free Stock Analysis Report

Blue Bird Corporation (BLBD) : Free Stock Analysis Report

Magenta Therapeutics, Inc. (MGTA) : Free Stock Analysis Report

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Zacks Investment Research