Wall Street rallied on Jul 22 after suffering for over a week as investors rotated out of mega-cap tech stocks and rushed toward small-cap and cyclical stocks, hoping that the Federal Reserve would soon start its rate cuts.
Small-cap stocks are still holding up with the Russell 2000 closing 1.7% higher on Monday. However, tech stocks rebounded Monday as investors rotated back into the growth stocks. This saw the S&P 500 closing up 1.1% on Monday to settle at 5,564.41 points, while the tech-heavy Nasdaq closed 1.6% higher at 18,007.57 points.
This was the S&P 500’s best day since Jun 5. Tech stocks have been responsible for the broader rally in 2023, which has also continued this year.
This year’s rally has primarily been fueled by the ongoing enthusiasm surrounding artificial intelligence (AI), especially generative AI, led by the industry darling NVIDIA Corporation NVDA.
Experts believe that AI has immense potential that has yet to be fully realized. NVIDIA's remarkable success in the past year has inspired many tech companies to explore AI's possibilities to gain long-term business advantages.
The progression of various smart devices is crucial in this field, as they require powerful computing and learning capabilities for tasks like face detection, image recognition and video analysis. These tasks need high processing power, speed, memory, low power consumption, and better graphics processors, which is benefiting the semiconductor industry.
Also, the Federal Reserve is gearing up for the first rate cut this year, which will mark the beginning of the easing cycle. Market participants are pricing in a 25 basis point rate cut in September. Lower interest rates reduce borrowing costs, which is favorable for growth stocks.
Our Choices
Given this scenario, it would be ideal to invest in mega-cap tech stocks such as Amazon.com, Inc. AMZN, Netflix, Inc. NFLX, QUALCOMM Incorporated QCOM and Apple, Inc. AAPL whichhave strong potential in 2024. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon.com, Inc. is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. AMZN’s online retail business revolves around the Prime program well-supported by the company’s massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish its footprint in the physical grocery supermarket space. AMZN also enjoys a dominant position in the cloud-computing market, particularly in the Infrastructure as a Service space, thanks to Amazon Web Services.
Amazon.com has an expected earnings growth rate of 57.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 60 days. AMZN currently sports a Zacks Rank #1.
Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 57.9%. The Zacks Consensus Estimate for the current-year earnings has improved 3.7% over the past 60 days. NFLX currently carries a Zacks Rank #2.
QUALCOMM Incorporated designs, manufactures and markets digital wireless telecom products and services based on the Code Division Multiple Access (“CDMA”) technology. QCOM’s products include CDMA-based integrated circuits and system software for wireless voice and data communications as well as global positioning system products. QUALCOMMalso offers development and other product-related services to U.S. government agencies and their contractors.
QUALCOMM’s expected earnings growth rate for the current year is 17.3%. The Zacks Consensus Estimate for the current-year earnings has improved 0.5% over the past 60 days. QCOM currently has a Zacks Rank #2.
Apple Inc.’s business primarily runs around its flagship iPhone. However, the Services portfolio of AAPL, which includes revenues from cloud services, the App store, Apple Music, AppleCare, Apple Pay, and licensing and other services, has now become the cash cow. Moreover, non-iPhone devices like Apple Watch and AirPod have gained significant traction.
Apple has an expected earnings growth rate of 7.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. APPL currently carries a Zacks Rank #2.
Check Out These Stocks Before They Report Earnings (Free Report)
A stock can jump +10-20% in a single day after a positive earnings surprise. What if you could get in early on those stocks? It could be the "holy grail" of stock picking for investors.
Zacks' new special report is designed to do exactly that. It reveals 5 promising stocks experts predict will crush earnings estimates and skyrocket in price.
Download Earnings Season Profit Secrets today, absolutely free.Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
