U.S. equities were volatile but drifting higher after the Federal Reserve on Wednesday decided to hold interest rates steady, as expected. It was a “hawkish hold” that talked up their health of the economy and set the stage for a single quarter-point hike before the end of the year, likely in December.
For the first time since late last year, Fed policymakers see the risks to the economy as “balanced” justifying their opinion that the case for a rate hike has strengthened. But continuing their long tradition of erring on the side of patience and more stimulus, the Fed wants to wait for further confirmation inflation will increase to their 2% target and that labor market slack is being reduced.
This decision removed the single largest risk to stocks heading into the U.S. presidential election in November and should clear the way for a nice relief rebound out of the tight three-month trading range we’ve suffered.
There are a few stocks to buy in a number of areas — including big-tech and inflation-sensitive areas — as they look ready for upside surges.
Here are three stocks to watch.
Stocks to Buy With the Fed’s Green Light: HP Inc (HPQ)
HP Inc (NYSE:HPQ) shares are extending above their uptrend resistance, returning to levels not seen since early last year. The company is enjoying a tailwind from bullish commentary on PC demand from Intel Corporation (NASDAQ:INTC), which raised its revenue guidance on replenishment of the PC supply chain and improving demand.
Wall Street also is looking favorably on its recent move to buy up Samsung’s (OTCMKTS:SSNLF) printer business. Yes, old-school printing is a (very) mature business — and that’s exactly why HPQ is making this purchase. The deal includes about 1,300 researchers and engineers that could help HP find a way to reinvigorate its offerings in the space.
Even after the acquisition, the combined HPQ-Samsung printer business still would make up only 10% of the A3 printing market, according to Long/Short Investments.
HPQ shares were up to start Wednesday, and were seeing additional buying near Wednesday’s end.
HP Inc will next report results on Nov. 22 after the bell. Analysts are looking for earnings of 36 cents per share on revenues of $11.8 billion.
Stocks to Buy With the Fed’s Green Light: GoPro (GPRO)
GoPro Inc (NASDAQ:GPRO) looks ready to resume its push above its 200-day moving average on the launch of eagerly awaited new products including the Hero5 cameras and the Karma drone — the latter a strong drone-gimbal-camera that presents a robust, value-priced alternative to the DJI Phantom.
Analysts at Wedbush increased their price target to $17.50 on confidence with these new products after a series of missteps over the last six quarters (ahem, Hero Session) and that we could be seeing an inflection point in the stock.
GPRO is up 4.2% for Edge subscribers on Wednesday alone.
GoPro will next report results on Oct. 27 after the close. Analysts are looking for a loss of 36 cents per share on revenues of $309.8 million.
Stocks to Buy With the Fed’s Green Light: Golden Star Resources (GSS)
Gold stocks like Golden Star Resources Ltd. (USA) (NYSEMKT:GSS) look ready to end a three-month reprieve as the Fed’s dovishness — as well as ongoing aggressive action by the Bank of Japan and the European Central Bank — increases the odds inflation continues to rise.
Based in Toronto, GSS operates the Wassa open pit gold mind in Ghana. The company recently announced it had paid back its $25 million loan with Ecobank in full, reducing interest expenses.
That said, caution is absolutely warranted on this play. While it sports a market cap of $350 million or so, this is a penny stock that has traded below $1 for most of the past three years.
It is up more than 350% in 2016, however, and it’s getting a huge tailwind from the Fed.