September lived up to its billing as the worst month of the year. Pulled lowered by the threat of higher interest rates, a looming government shutdown, and rising energy prices, U.S. indices ended September in the red. However, there’s still reason for optimism for some of the market’s top stocks and indices. For one, the final three months of the year are historically the strongest.
Two, a government shutdown has been averted, which takes pressure off equities. Three, the U.S. Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures Price Index (PCE), just came in lower than expected. In addition, we’re about to get another round of earnings that could serve as another powerful catalyst. That being said, we wanted to take a look at some of the top stocks to watch, especially if markets are about to turn around.
Top Stocks: Nike (NKE)
Nike (NYSE:NKE) just reported that its revenue jumped 2% for its fiscal first quarter from a year earlier to $12.9 billion. That was slightly less than the $13 billion expected on Wall Street. However, Nike’s earnings per share did come in at 94 cents, which was much better than the 76 cents that was expected.
Nike also reaffirmed both its fiscal second quarter and full-year guidance. First, the company announced that its inventories declined 10% in the latest quarter from a year earlier. Nike had been stuck with high inventory levels since the Covid-19 pandemic. Second, Nike said its sales in China increased 5% from a year earlier. There had been concerns about how the economic slowdown in China would impact Nike. NKE stock is still down 20% year to date. Buy the dip.
Costco (NASDAQ:COST) didn’t raise its membership fees or issue a special dividend as expected. However, the big box retailer managed to turn in a print that beat Wall Street expectations on both the top and bottom lines. Much of that being fueled by robust grocery sales. EPS came in at $4.86 as compared to expectations for $4.79. Revenue totaled $78.9 billion as compared to the $77.9 billion that was forecast.
Even better, the company said it ended its recent quarter with 71 million paid household members, up 8% from a year ago. Membership growth outpaced its rate of new store openings, which grew by 3%. And Costco executives said they plan to open 10 new stores in this year’s fourth quarter.
Top Stocks: Meta Platforms (META)
Meta Platforms (NASDAQ:META) just unveiled several new products that should keep its stock buoyant. For one, Meta introduced a new virtual reality headset and several artificial intelligence applications at its 2023 developer conference. The new Quest 3 VR headset, which will be available to consumers on Oct. 10, is priced at $499 and expected to be a hot item this holiday season.
The Quest 3 headset supports video games from Microsoft’s (NASDAQ:MSFT) Xbox. It’s also aimed at business users through a new platform called Meta Quest for Business that allows app and device management for corporate customers. The new headset comes months ahead of Apple’s (NASDAQ:AAPL) Vision Pro augmented reality headset which is scheduled to be released in early 2024. Meta also unveiled a new version of its Ray-Ban mixed reality smart glasses that can capture photos and videos.
Peloton Interactive (PTON)
It’s been a while since there’s been anything positive to say about Peloton Interactive (NASDAQ:PTON). The maker of Internet-connected treadmills and exercise bikes had fallen on hard times since the pandemic ended and people returned to the gym. However, PTON recently jumped 15% higher on news that the company struck a five-year partnership deal with Lululemon Athletica (NASDAQ:LULU). Under the terms of the deal, Peloton will become the exclusive provider of digital fitness content to Lululemon.
In turn, Lululemon will become Peloton’s primary apparel partner. Additionally, Lululemon will stop selling its Studio Mirror fitness device that directly competed against Peloton’s treadmills and exercise bikes. Lululemon will also discontinue its digital app-only membership tier on November 1 as part of the arrangement with Peloton. Eventually, Peloton will develop all content for Lululemon Studio, which, like Peloton, offers pre-recorded online fitness classes to users. Analysts hailed the deal as great news for Peloton, which has managed to neutralize one of its main competitors.
Top Stocks: General Mills (GIS)
Food company General Mills (NYSE:GIS) also fell on hard times. However, it does appear to be redeeming itself. For one, the company just posted earnings that beat Wall Street forecasts across the board. For its fiscal 2024 first quarter, General Mills reported EPS of $1.09, which was slightly ahead of the consensus estimate among analysts of $1.08. Revenue in the quarter totaled $4.90 billion, which was better than the $4.88 billion that Wall Street analysts had penciled in for the company.
Two, General Mills, which makes Yoplait yogurt, Cheerios breakfast cereal, and Betty Crocker baking products, also reaffirmed its full-year guidance. The company said that it continues to expect that its profits will increase by 4% to 6% for its fiscal 2024 year. It also expects revenue to grow by 3% to 4%. Much like Costco, General Mills is a stock that will likely perform well even in the event that the economy tips into a recession.
Netflix (NASDAQ:NFLX) dropped after a senior executive essentially lowered the company’s forward guidance. In fact, Netflix Chief Financial Officer Spencer Neumann lowered the guidance on the company’s operating margins. He also warned that the company’s new advertising business was not yet material to overall revenue, and said that there are no plans to add live sports to the streaming platform. These comments didn’t sit well with investors and traders, who bid the stock lower. However, Netflix’s upcoming earnings could surprise to the upside. Plus, the strike by Hollywood writers is now over, which can only help Netflix move forward.
Lastly, we come to video game retailer and notorious meme stock GameStop (NYSE:GME). Of course, this name is not without risks. The company continues to struggle with a poorly executed turnaround strategy. However, the recent appointment of activist investor Ryan Cohen as GameStop’s new CEO has investors excited again.
We should also note that Cohen, who is already on the company’s board of directors, won’t receive any compensation for his expanded role as CEO, president, and executive chairman. Cohen’s appointment as CEO comes after GameStop fired former CEO Matthew Furlong in June. With that, investors should still proceed with caution.
On the date of publication, Joel Baglole held long positions in AAPL and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.