U.S. equities rallied again on Thursday thanks to a dovish takeaway from the latest Federal Reserve meeting minutes. While most Fed policymakers continue to believe a rate hike will happen by the end of the year, future market odds keep dropping, with a better-than-even chance not seen until March 2016 as inflation remains soft.
With the September payrolls report coming in soft and China still looking vulnerable, there is simply less and less justification to raising rates for the first time since 2006 before the end of the year.
The stimulus junkies on Wall Street just got an early Christmas present, meaning a Santa Claus rally is almost certainly in store.
No surprise, then, that the past week has unleashed a fresh stock market uptrend for the first time in months, pushing the Dow Jones Industrial Average back over the 17,000 level. Technical indicators suggest this is just the start of a multimonth rally — likely lifting stocks through the end of the year in a typical Santa Claus rally before rate hike fears resurface.
If so, these seven blue-chip stocks are set to outperform.
Blue-Chip Stocks for a Santa Claus Rally: Bank of America Corp (BAC)
Bank of America (BAC), like other financial stocks, is set to benefit from the rising inflation expectations and higher long-term bond yields that are accompanying the realization that the Fed likely won’t be able to raise interest rates before the end of the year.
That should push BAC up and out of a three-month consolidation range for a test of resistance near the 200-day and 50-day moving averages around $16.25.
In response, I have recommended the Nov BAC $16 calls to my Edge Pro subscribers. BAC will report Q3 results on Oct. 14 before the open.
Blue-Chip Stocks for a Santa Claus Rally: Hewlett-Packard Company (HPQ)
Hewlett-Packard (HPQ) is lifting to levels not seen since early August as PC/chipmaker stocks get a lift on building excitement over Microsoft’s (MSFT) new Windows 10 operating system heading into the holiday season.
A new survey by Gartner showed that 50% of consumers expressed an intention to purchase a new PC in the next 12 months vs. just 21% looking for a new tablet.
I have recommended the Nov $29 HPQ calls to my Edge Pro subscribers. HPQ will report results on Nov. 25 after the close.
Blue-Chip Stocks for a Santa Claus Rally: Chesapeake Energy Corporation (CHK)
Hopes of a continuation of the Fed’s 0% interest rate policy has weakened the dollar and lifted commodity prices including energy. That’s given the entire oil and gas sector a lift, including beleaguered shale play Chesapeake Energy (CHK) — which is now rising out of a basing pattern going back to July.
I’ve recommended the Nov $9 CHK calls to my Edge Pro subscribers. The company will report results on Nov. 4 before the open.
Blue-Chip Stocks for a Santa Claus Rally: Walt Disney Co (DIS)
After taking a hit in August on cable cord cutting concerns surrounding its ESPN and other television segments, Disney (DIS) is bouncing back and looks ready to rise out of a three-month basing pattern as the release of the new Star Wars sequel approaches.
It’s going to be huge, likely a record-setting blockbuster performance that will refocus investor attention on the company’s broad and popular portfolio of creative intellectual property from Marvel to Disney Princesses to Luke Skywalker.
I have recommended the stock to Edge subscribers. The company will report results on Nov. 5 after the close.
Blue-Chip Stocks for a Santa Claus Rally: Caterpillar Inc. (CAT)
With some of the economic data in China firming up, such as real estate sales, along with the stabilization in industrial metals suggests Caterpillar (CAT) could finally see some share price relief. The machinery maker has seen its shares suffer a downtrend since the summer of 2014 and last traded over its 200-day moving average last November.
I have recommended the stock to Edge subscribers. The company will report results on Oct. 22 before the open.
Blue-Chip Stocks for a Santa Claus Rally: International Business Machines Corp. (IBM)
It’s hard to believe, but IBM (IBM) has been in a long-term downtrend since early 2013 on persistent declines in quarterly revenues and nagging feeling that the company’s focus on services has fizzled out. But analysts are beginning to see signs of a re-acceleration of top-line growth.
The stock also got a pop after Warren Buffett told CNBC in early September that he has been an active buyer at these levels.
I have recommended the stock to Edge subscribers. The company will report results on Oct. 19.
Blue-Chip Stocks for a Santa Claus Rally: United Technologies Corporation (UTX)
United Technologies (UTX) — the maker of jet engines and elevators, among other things — has punched up and out of its three-month basing pattern on Friday as investors warm up to the idea of a re-acceleration in global growth thanks to a continuation or increase in monetary policy stimulus. Shares were hit hard after peaking earlier this year, but should be good for a test of its 200-day moving average — which would be a 14% rise from here.
I have recommended the stock to Edge subscribers. The company will report results on Oct. 20 before the open.