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Uptick in Consumer Confidence Puts 3 Stocks on Top

Zacks Equity Research

Confidence of Americans in the country's economy moved up in May, largely prompted by optimism over businesses and stores reopening around the United States. In addition, consumers remained hopeful of a coronavirus vaccine hitting the markets soon, which could push business activity in the country further up.

Investors who wish to bank on this optimism could watch out for a couple of stocks that are most likely to gain as consumer activity comes back on track while the economy gathers steam.

Consumer Confidence is Up in May

On May 26, the Conference Board reported a comeback in consumer confidence among Americans for May. The index improved to 86.6 in May, marking an increase from 85.7 in the previous month. In fact, this is the first time the index rose since its decline in March and April.

The index of American consumers’ outlook was pushed by a pickup in expectations for the next six months, the Conference Board said on Tuesday.

According to Lynn Franco, the Conference Board’s senior director of economic indicators, the free fall in confidence stopped in May after undergoing two months of rapid decline. This means that consumers are feeling confident about the economy over the next couple of months, which could positively impact households’ spending. This, in turn, would affect retailers since consumer spending accounts for as much as two-third of economic activity in the country.

Reopening Economy, Vaccine to Boost Confidence Ahead

After almost all businesses closed in March, economies across all 50 states have begun to reopen gradually. The unexpected business shutdowns led to the worst recession in modern history, with 20.5 million jobs lost last month and as many as 10 million more expected to be lost this month.

In addition, optimistic news on the development of a vaccine for the deadly virus is set to boost confidence ahead.

First, Moderna, Inc. MRNA announced last week that all 45 patients in its vaccine trial had developed coronavirus antibodies. Dr. Anthony Fauci, the country’s leading infectious disease expert, also expressed his optimism last week over the phase one trial of the vaccine under development by Moderna in collaboration with the National Institute of Allergy and Infectious Diseases.

Second, biotech company Novavax, Inc. NVAX said earlier this week that it had started the first human study of its experimental coronavirus vaccine, with initial results on safety and immune responses expected in July.

These encouraging factors could boost consumer confidence ahead.

3 Stocks to Buy

We have, therefore, rounded up three stocks that could gain from rising business activity. All of these stocks carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Systemax Inc. SYX is a direct marketer of brand name and private label industrial and business equipment and supplies. The Zacks Consensus Estimate for the company’s current-year earnings has moved 15.8% north in the past 60 days. Systemax’s expected earnings growth rate for the next year is 18.2%. Systemax belongs to the Zacks Retail - Consumer Electronicsindustry. The stock carries a Zacks Rank #1.

Sportsman's Warehouse Holdings, Inc. SPWH operates as an outdoor sporting goods retailer. The Zacks Consensus Estimate for the company’s current-year earnings has moved 3.3% north in the past 60 days. Sportsman's Warehouse’s expected earnings growth rate for the current year is 34%. It belongs to the Zacks Retail - Apparel and Shoesindustry. The stock carries a Zacks Rank #2.

The Kroger Co. KR is a retailer that offers food products, medicine, general merchandise, seafood, organic produce and other grocery products. The Zacks Consensus Estimate for the company’s current-year earnings has moved 3.8% north in the past 60 days. Kroger’s expected earnings growth rate for the current year is 12.3%. Kroger belongs to the Zacks Retail - Supermarketsindustry and carries a Zacks Rank #2.

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