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2 Top S&P 500 Stocks to Buy on Market Dip: AAPL, MU
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Wall Street has suffered a setback over the past few trading sessions as a weakening labor market and contraction in manufacturing activity raised apprehensions about a looming recession. Also, the surging Japanese yen against the U.S. dollar caused a “carry trade” and a market meltdown.
The S&P 500 slipped 3% on Monday and registered the largest percentage drop since Sep 13, 2022, while the SPDR S&P 500 ETF (SPY - Free Report) also declined 2.9% in yesterday’s trading session. The broader index, in reality, declined 6.1% over the past three trading days, its largest three-day percentage drop since June 14, 2022.
On the other hand, Wall Street’s fear gauge, the CBOE Volatility Index, closed at 38.57 on Monday, which is much above its long-term average of 20. However, astute investors shouldn’t shun equities completely amid the market mayhem. Instead, they should place bets on fundamentally sound stocks to meet their short-term and long-term obligations. After all, this is a temporary blip, and the market is all set to bounce back.
Notably, the S&P 500 historically has rebounded a month, three months, and one year later following three successive falls of 1% or more, which it did in the last three trading sessions, per Dow Jones Market Data.
Moreover, the service side of the economy is humming, and the Federal Reserve is widely expected to trim interest rates as early as fall, which bodes well for the stock market.
Service Sector is Expanding
Improvements in new orders helped the service side of the economy to expand in July. The ISM’s non-manufacturing PMI increased to 51.4% in July from June’s reading of 48.8%, the lowest since May 2020.
The PMI’s reading above 50 indicates expansion in the service sector, which could easily nullify recession anxieties. This is because the service sector accounts for two-thirds of economic activity.
Fed Rate Cut Soon
Fed Chair Jerome Powell recently assured that the central bank will dial back on its aggressive monetary policy since monthly price pressures from year-ago levels have begun to subside and could decline further toward the Fed’s target of 2%.
Most market participants expect a greater likelihood of a 50-basis-point (bps) reduction in interest rates in September instead of an earlier projection of a cut of 25 bps. Needless to say, interest rate cuts increase consumer outlays, reduce borrowing costs and boost economic growth (read more: Fed's September Rate Cut Bets Rise: NVDA, GOLD, PHM to Gain).
Here’s Why AAPL, MU is Worth a Buy on the Dip
Since activity in the service sector is growing despite Wall Street turbulence, things are looking good for tech behemoths such as Apple Inc. (AAPL - Free Report) and Micron Technology, Inc. (MU - Free Report) in the long run. Interest rate cuts are a good omen for such tech players as their cash inflows aren’t hampered and can be utilized for research and development.
Spectacular growth in artificial intelligence (AI) over the past year has been a blessing in disguise for Micron Technology, while Apple too recently joined the AI bandwagon (read more: Here's Why Apple is a Bullish Stock in a Tough August).
While Apple is expected to benefit from planned iPhone sales discounts in China, Micron Technology is expected to do well due to the revival in DRAM demand. Also, let’s admit that these stocks were pretty pricey, but thanks to the dramatic fall in their prices recently, investors should essentially buy the stocks at a discount.
Apple shares down: Zacks rank (Buy)
Shares of the iPhone maker slumped 4.8% and 4.1%, respectively, on Monday and in the last five trading sessions. However, AAPL’s expected earnings growth for the current quarter and year is 8.2% and 8.3%, respectively.
The average short-term price target of AAPL by brokerage firms increased 6.4% from the company’s last closing price of $219.86.
Image Source: Zacks Investment Research
Micron Technology shares dip, but strong growth score
Shares of the provider of semiconductor memory solutions fell 2.5% and 16.2%, respectively, on Monday and over the past five trading sessions. However, MU’s expected earnings growth for the current quarter and year is 200.9% and 126.1%, respectively.
The Zacks Rank #2 company currently has a Growth Score of A. The average short-term price target of MU by brokerage firms surged 77.2% from the company’s last closing price of $92.70.
Image Source: Zacks Investment Research
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2 Top S&P 500 Stocks to Buy on Market Dip: AAPL, MU
Wall Street has suffered a setback over the past few trading sessions as a weakening labor market and contraction in manufacturing activity raised apprehensions about a looming recession. Also, the surging Japanese yen against the U.S. dollar caused a “carry trade” and a market meltdown.
The S&P 500 slipped 3% on Monday and registered the largest percentage drop since Sep 13, 2022, while the SPDR S&P 500 ETF (SPY - Free Report) also declined 2.9% in yesterday’s trading session. The broader index, in reality, declined 6.1% over the past three trading days, its largest three-day percentage drop since June 14, 2022.
On the other hand, Wall Street’s fear gauge, the CBOE Volatility Index, closed at 38.57 on Monday, which is much above its long-term average of 20. However, astute investors shouldn’t shun equities completely amid the market mayhem. Instead, they should place bets on fundamentally sound stocks to meet their short-term and long-term obligations. After all, this is a temporary blip, and the market is all set to bounce back.
Notably, the S&P 500 historically has rebounded a month, three months, and one year later following three successive falls of 1% or more, which it did in the last three trading sessions, per Dow Jones Market Data.
S&P 500’s 3+ Days of 1% Decline
Image Source: Dow Jones Market Data
Janus Henderson Investors research shows that during presidential election years the S&P 500 has posted an average annual return of 9.9% (read more: 5 Growth Stocks to Buy for an Imposing Election Year Rally).
Moreover, the service side of the economy is humming, and the Federal Reserve is widely expected to trim interest rates as early as fall, which bodes well for the stock market.
Service Sector is Expanding
Improvements in new orders helped the service side of the economy to expand in July. The ISM’s non-manufacturing PMI increased to 51.4% in July from June’s reading of 48.8%, the lowest since May 2020.
The PMI’s reading above 50 indicates expansion in the service sector, which could easily nullify recession anxieties. This is because the service sector accounts for two-thirds of economic activity.
Fed Rate Cut Soon
Fed Chair Jerome Powell recently assured that the central bank will dial back on its aggressive monetary policy since monthly price pressures from year-ago levels have begun to subside and could decline further toward the Fed’s target of 2%.
Most market participants expect a greater likelihood of a 50-basis-point (bps) reduction in interest rates in September instead of an earlier projection of a cut of 25 bps. Needless to say, interest rate cuts increase consumer outlays, reduce borrowing costs and boost economic growth (read more: Fed's September Rate Cut Bets Rise: NVDA, GOLD, PHM to Gain).
Here’s Why AAPL, MU is Worth a Buy on the Dip
Since activity in the service sector is growing despite Wall Street turbulence, things are looking good for tech behemoths such as Apple Inc. (AAPL - Free Report) and Micron Technology, Inc. (MU - Free Report) in the long run. Interest rate cuts are a good omen for such tech players as their cash inflows aren’t hampered and can be utilized for research and development.
Spectacular growth in artificial intelligence (AI) over the past year has been a blessing in disguise for Micron Technology, while Apple too recently joined the AI bandwagon (read more: Here's Why Apple is a Bullish Stock in a Tough August).
While Apple is expected to benefit from planned iPhone sales discounts in China, Micron Technology is expected to do well due to the revival in DRAM demand. Also, let’s admit that these stocks were pretty pricey, but thanks to the dramatic fall in their prices recently, investors should essentially buy the stocks at a discount.
Apple shares down: Zacks rank (Buy)
Shares of the iPhone maker slumped 4.8% and 4.1%, respectively, on Monday and in the last five trading sessions. However, AAPL’s expected earnings growth for the current quarter and year is 8.2% and 8.3%, respectively.
The Zacks Rank #2 (Buy) company presently has a Growth Score of B. Our research shows that stocks with a Growth Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best investment opportunities in the growth investing space. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
The average short-term price target of AAPL by brokerage firms increased 6.4% from the company’s last closing price of $219.86.
Image Source: Zacks Investment Research
Micron Technology shares dip, but strong growth score
Shares of the provider of semiconductor memory solutions fell 2.5% and 16.2%, respectively, on Monday and over the past five trading sessions. However, MU’s expected earnings growth for the current quarter and year is 200.9% and 126.1%, respectively.
The Zacks Rank #2 company currently has a Growth Score of A. The average short-term price target of MU by brokerage firms surged 77.2% from the company’s last closing price of $92.70.
Image Source: Zacks Investment Research