5 Strong Growth S&P 500 Stocks to Ride Best Rally Since 2014

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The S&P 500 is enjoying its best three-week stretch of gains since 2014. The index rose 7.3% during the past three weeks after a rebound in oil prices from its 12-year low ebbed deflationary concerns. A boost in hiring complemented with strong data ranging from manufacturing to construction activities also fueled investors' sentiment. China's stimulus measures, on the other hand, raised hopes of a much stable global economy which would in turn contain the volatility in the broader markets.

The index had breached its key level of 2,000 on Friday before ending the day at 1,999.99. It was a two-month high for the index, while the advance took all the S&P 500 sectors to end higher. In fact, the beaten-down energy sector gained the most. Given these positive vibes, it is expected that the S&P 500 will continue its bullish run in the near term. Since the long term bodes well for stocks, the ones on a growth curve look to be the best bet at the moment.   

An Oil-Induced Rally

The S&P 500 mirrored a rally in crude oil prices that capped a third week of gain on Friday. The WTI crude surged 3.8% to $35.92 per barrel on Friday, reaching its highest level since Jan 5. Separately, Brent crude soared 4.3% to $35.96 a barrel, the highest finish since Dec 10.

Signs of decline in U.S. production and continuous talk about freezing output by major oil producers were cited to be the reasons behind the oil price surge. Active U.S. oil-drilling rigs dropped for the 11th straight week. According to data from Baker Hughes, U.S. oil rig count was down by 8 to 392 as of Friday. Including natural gas rigs, it was down 13 at 489, the lowest level since Apr 23, 1999.

Among other encouraging news, Nigeria's oil minister said that major oil producing nations will meet on Mar 20 to discuss ways to curtail production. This will help to bridge the wide demand-supply gap.

Outlook for global demand for oil is also brightening. In China, demand for foreign crude is increasing, as domestic crude production declines. Moreover, U.S. jobs growth rebounded last month, which will add to further demand for oil as more commuters drive to work.

Upbeat Jobs Data Added to Optimism

The jobs data painted a solid picture of the labor market. The U.S. economy added 242,000 jobs in February, handily beating the consensus estimate of 194,000, according to the Bureau of Labor Statistics (BLS). The tally was also considerably higher than January's upwardly revised job number of 172,000. Jobs gain was broad based, including gains in sectors like health care and social assistance, retail trade, food services and drinking places, and private educational services.

Private sector hiring also increased in February. According to Automatic Data Processing, Inc. ADP, 214,000 private jobs were added last month. The numbers were higher than market expectations of 190,000 jobs.

Meanwhile, the unemployment rate in February remained unchanged at 4.9%. Further, the U-6 rate that includes the unemployed, the underemployed and the discouraged dipped to 9.7% in February from 9.9% in January, its lowest level since May 2008.

Several Indicators Show Economic Expansion

While a surge in hiring buoyed investors, a slew of promising economic reports also provided the catalyst for market gains. The ISM Manufacturing Index increased to 49.5% in February from 48.2% in January, higher than the consensus estimate of 48.6. Even though a reading below 50 indicates contraction in manufacturing activity, it occurred at a lower-than-expected pace. The ISM Services Index came in at 53.4% in February, in line with the consensus estimate.

Meanwhile, consumer spending levels increased at the fastest pace in eight months this January. Not only did consumers buy big ticket items like cars and houses but they also ramped up purchases of a range of goods that include other discretionary products. The Commerce Department had reported that personal spending increased 0.5% in January, exceeding the consensus estimate of a rise by 0.3%.

Moreover, retail sales are off to a good start this year, indicating strength in consumer spending. The Commerce Department said on Friday that sales at retail stores rose 0.2% in January. The so-called core retail sales also increased 0.6% in January.

The housing industry is also firmer than what most believed. Construction outlay touched a record high in January. Outlays on construction rose 1.5% to a seasonally adjusted annual rate of $1.41 trillion in January from the upwardly revised estimate of $1.12 trillion in December, according to the Commerce Department. Existing home sales also posted record gains in January. Sales of existing homes increased 0.4% in January to a seasonally adjusted annual pace of 5.47 million.

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Top 5 S&P 500 Growth Stocks to Invest In

Recession fears had plagued investors during the first six weeks of the year as slump in oil prices continued to drag the S&P 500 down. However, oil prices bounced back from its record low in mid-February, which helped the index to register its best three-week gain since 2014 and also post its best ever start to the month of March since 2002. Surge in hiring, positive readings on manufacturing, consumer and housing fronts also added to the optimism.

For some time now, China's weak economy was pulling the broader markets down. But, the recent stimulus measures by the People's Bank of China to address concerns over the country's recent economic slowdown boosted investor sentiment. The People's Bank of China (PBOC) reduced the reserve requirement ratio (RRR) by 0.5% to 17%.

Banking on these positives, it is expected that the S&P 500 will continue its winning streak in the near term, which eventually makes growth stocks more appealing. Growth stocks are associated with booming companies whose earnings are expected to grow at an above-average rate relative to the market.

With the help of our new style score system, we have short-listed Zacks Rank #1 (Strong Buy) or #2 (Buy) stocks with a Growth Style Score of ‘A' that hold immense growth potential. Our research shows that stocks with a Growth Style Score of ‘A' when combined with a Zacks Rank #1 or #2 offer the best investment opportunities in the growth investing space.

Campbell Soup Co. CPB, together with its subsidiaries, manufactures and markets convenience food products. CPB holds a Zacks Rank #1 and has a Growth Style Score of ‘A.' The company has expected earnings growth of 20.1% for the current year.

HCA Holdings, Inc. HCA through its subsidiaries provides health care services in the U.S. HCA holds a Zacks Rank #1 and has a Growth Style Score of ‘A.' The company has expected earnings growth of 12.3% for the current year.

Tyson Foods, Inc. TSN together with its subsidiaries operates as a food company worldwide. TSN holds a Zacks Rank #1 and has a Growth Style Score of ‘A.' The company has expected earnings growth of 25.2% for the current year.

Facebook, Inc. FB operates as a mobile application and Website that helps people to communicate with each other on mobile devices and personal computers worldwide. FB holds a Zacks Rank #2 and has a Growth Style Score of ‘A.' The company has expected earnings growth of 58.7% for the current year.

The Kroger Co. KR together with its subsidiaries operates as a retailer in the U.S and internationally. KR holds a Zacks Rank #2 and has a Growth Style Score of ‘A.' The company has expected earnings growth of 9.5% for the current year.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report

TYSON FOODS A TSN: Free Stock Analysis Report

CAMPBELL SOUP CPB: Free Stock Analysis Report

HCA HOLDINGS HCA: Free Stock Analysis Report

KROGER CO KR: Free Stock Analysis Report

AUTOMATIC DATA ADP: Free Stock Analysis Report

FACEBOOK INC-A FB: Free Stock Analysis Report

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