September was supposed to be a rocky month for stocks. According to Dow Jones Market Data, since 1937, both the S&P 500 and the Dow averaged a loss of 1%. The Nasdaq Composite, as incepted in 1971, averaged a loss of 0.5%. CFRA added that the broader S&P 500 has averaged a 1% decline, particularly, in September since 1946.
What’s more, traditionally September is gloomier after a downbeat August. It was a wild month for the stock market, with the S&P 500, the Dow and the Nasdaq registering a loss of 1.8%, 1.7% and 2.6%, respectively. By the way, this marked the worst August performance for the bourses since 2015.
And whenever the S&P 500 loses more than 1.5% in August, the Dow declines an average 1.1% in September, while the Nasdaq has seen an average drop of 0.8%. The S&P 500, itself, continued its losing run, declined 0.9%.
But pleasantly, such historical statistics have been squashed by the stock market so far this month. The S&P 500, the Dow and the Nasdaq have already gained more than 3% each. From the ECB stimulus to trade optimism, everything is helping stocks eke out gains. And let’s admit that recession may be coming but it isn’t right around the corner.
What Happened So Far in September?
The ECB has launched fresh stimulus packages in an attempt to prevent a sluggish Eurozone economy from grinding to a halt. The ECB confirmed that it would trim its deposit rate (the interest paid to commercial banks when they place funds with the central bank) by 0.1 percentage points to an all-time low of -0.5%. At the same time, the ECB has announced a massive new-bond buying program. The central bank’s quantitative easing (QE) program will involve 20 billion euros ($21.9 billion) per month of net asset purchases for as long as required.
And as the ECB adds more stimuli, the pressure is mounting on the Fed to do the same. President Trump has already called for the Fed to cut rates to boost the U.S. economy. In fact, now an overwhelming majority of observers are seeing an imminent rate cut on August’s soft employment report.
Slowdown in the U.S. private sector job scenario in August will no doubt keep the Fed on track to lower its benchmark rate by at least a quarter-percentage again later this month. The U.S. economy added just 130,000 jobs, almost 28,000 less than analysts’ expectations and 29,000 lower than July levels. By the way, August’s job addition was the lowest in three months giving ample hints that the intensifying U.S.-China trade dispute has taken a toll on economic expansion.
On the trade front, Beijing has lifted tariffs on some U.S. products amid the trade tensions. As a show of goodwill, Trump too delayed tariff hikes against China. Per South China Morning Post citing the Customs Tariff Commission of the State Council, the exemptions on U.S. goods will take effect on Sep 17. The products don’t include big ticket items like agricultural products, but it does include items such as alfalfa pellets, fish feed and medical linear accelerators, to name a few.
Trump reciprocated by announcing a delay in implementation of higher tariffs on $250 billion of Chinese goods. Trump tweeted that tariff hikes from 25% to 30% will now go into effect on Oct 15 rather than the previously scheduled Oct 1.
Last but not the least, the yield on the 10-year Treasury note fell below the 2-year Treasury note a few weeks ago, raising concerns about a possible recession in the near term. But, yield curve inversion lasted for only three days, according to the Treasury department. So, the risk of an imminent recession diminishes. And with consumers remaining confident about their well-being and the economy growing at a steady pace, investors can easily ignore the recession argument at least for the time being.
4 Winning Picks
Thanks to the aforesaid positives, the U.S. stock market continues to edge higher. Banking on such bullish sentiments, investing in solid growth stocks seems prudent. We have, thus, selected four stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Score of A or B.
Biogen Inc. BIIB discovers, develops, manufactures and delivers therapies for treating neurological and neurodegenerative diseases. The company has a Zacks Rank #2 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 9.1% in the last 60 days. The company’s expected earnings growth rate for the current year is 23.6% compared with the Medical - Biomedical and Genetics industry’s estimated rally of 6.5%. The company has outperformed the broader industry so far this month (+5.7% vs +0.8%).
Crocs, Inc. CROX designs, develops, manufactures, markets, and distributes casual lifestyle footwear and accessories for men, women, and children. The company has a Zacks Rank #1 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 12% in the last 60 days. The company’s expected earnings growth rate for the current year is 62.8% compared with the Textile - Apparel industry’s expected rally of 11.8%. The company has outperformed the broader industry so far this month (+25.8% vs +10.7%). You can see the complete list of today’s Zacks #1 Rank stocks here.
Casey's General Stores, Inc. CASY operates convenience stores under the Casey's and Casey's General Store names. The company has a Zacks Rank #2 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 3.1% in the last 60 days. The company, which is part of the Retail - Convenience Stores industry, is expected to notch earnings growth of 15% and 9.6% in the current quarter and year, respectively. The company has outperformed the broader industry so far this month (+1.1% vs -0.6%).
Clean Harbors, Inc. CLH provides environmental, energy, and industrial services in North America. The company has a Zacks Rank #1 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has risen 6.6% in the last 60 days. The company’s expected earnings growth rate for the current year is 54% against the Waste Removal Services industry’s projected decline of 3.8%. The company has outperformed the broader industry so far this month (+5.7% vs -3.7%).
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