Slowing inflation and a policy pivot by the Federal Reserve could set up a rebound year for stocks
Following a sharp and sustained rise in interest rates, U.S. stocks have taken a broad beating this year.
But 2023 may bring very different circumstances.
Below are lists of analysts' favorite stocks among the benchmark S&P 500 , the S&P 400 Mid Cap Index (MID) and the S&P Small Cap 600 Index that are expected to rise the most over the next year. Those lists are followed by a summary of opinions of all 30 stocks in the Dow Jones Industrial Average .
Stocks rallied on Dec. 13 when the November CPI report showed a much slower inflation pace than economists had expected. Then on Dec. 14, as expected, the And the market may be shifting because this week's consumer price index report showed a decline in inflation. Following that improvement, the Federal Reserve slowed the pace of its interest rate increases.
The 0.50% increase in the federal-funds rate followed four previous increases of 0.75%. The rate began 2022 in a range of zero to 0.25%, where it had sat since March 2020. Its target range is now 4.25% -- 4.5%,
A further slowing of inflation and the possibility that the federal funds rate will reach its "terminal" rate (the highest for this cycle) in the near term could set the stage for a broad rally for stocks in 2023.
Wall Street's large-cap favorites
Among the S&P 500, 92 stocks are rated "buy" or the equivalent by at least 75% of analysts working for brokerage firms. That number itself is interesting -- at the end of 2021, 93 of the S&P 500 had this distinction. Meanwhile, the S&P 500 has declined 16% in 2022, with all sectors down except for energy, which has risen 53%, and the utilities sector, which his risen 1% (both excluding dividends).
Here are the 20 stocks in the S&P 500 with at least 75% "buy" or equivalent ratings that analysts expect to rise the most over the next year, based on consensus price targets:
Company Ticker Industry Closing price -- Dec. 12 Consensus price target Implied 12-month upside potential Share "buy" ratings Price change -- 2022 through Dec. 12
EQT Corp. EQT Oil and Gas Production $36.91 $59.70 62% 78% 69%
Catalent Inc. CTLT Pharmaceuticals $45.50 $72.42 59% 75% -64%
Amazon.com Inc. AMZN Internet Retail $90.55 $136.02 50% 91% -46%
Global Payments Inc. GPN Misc. Commercial Services $99.64 $147.43 48% 75% -26%
Signature Bank SBNY Regional Banks $122.73 $180.44 47% 78% -62%
Salesforce Inc. CRM Software $133.11 $195.59 47% 80% -48%
Bio-Rad Laboratories Inc. Class A BIO Medical Specialties $418.28 $591.00 41% 100% -45%
Zoetis Inc. Class A ZTS Pharmaceuticals $152.86 $212.80 39% 87% -37%
Delta Air Lines Inc. DAL Airlines $34.77 $48.31 39% 90% -11%
Diamondback Energy Inc. FANG Oil and Gas Production $134.21 $182.33 36% 84% 24%
Caesars Entertainment Inc CZR Casinos/ Gaming $50.27 $67.79 35% 81% -46%
Alphabet Inc. Class A GOOGL Internet Software/ Services $93.31 $125.70 35% 92% -36%
Halliburton Co. HAL Oilfield Services/ Equipment $34.30 $45.95 34% 86% 50%
Alaska Air Group Inc. ALK Airlines $45.75 $61.08 34% 93% -12%
Targa Resources Corp. TRGP Gas Distributors $70.42 $93.95 33% 95% 35%
Charles River Laboratories International Inc. CRL Misc. Commercial Services $201.94 $269.25 33% 88% -46%
ServiceNow Inc. NOW Information Technology Services $401.64 $529.83 32% 92% -38%
Take-Two Interactive Software Inc. TTWO Software $102.61 $135.04 32% 79% -42%
EOG Resources Inc. EOG Oil and Gas Production $124.06 $158.24 28% 82% 40%
Southwest Airlines Co. LUV Airlines $38.94 $49.56 27% 76% -9%
Source: FactSet Most of the companies on the S&P 500 list expected to soar in 2023 have seen large declines in 2022. But the company at the top of the list, EQT Corp. (EQT), is an exception. The stock has risen 69% in 2022 and is expected to add another 62% over the next 12 months. Analysts expect the company's earnings per share to double during 2023 (in part from its expected acquisition of THQ), after nearly a four-fold EPS increase in 2022.
Shares of Amazon.com Inc. (AMZN) are expected to soar 50% over the next year, following a decline of 46% so far in 2022. If the shares were to rise 50% from here to the price target of $136.02, they would still be 18% below their closing price of 166.72 at the end of 2021.
You can see the earnings estimates and more for any stock in this article by clicking on its ticker.
Mid-cap stocks expected to rise the most
The lists of favored stocks are limited to those covered by at least five analysts polled by FactSet.
Among components of the S&P 400 Mid Cap Index, there are 84 stocks with at least 75% "buy" ratings. Here at the 20 expected to rise the most over the next year:
Company Ticker Industry Closing price -- Dec. 12 Consensus price target Implied 12-month upside potential Share "buy" ratings Price change -- 2022 through Dec. 12 Arrowhead Pharmaceuticals Inc. ARWR Biotechnology $31.85 $69.69 119% 83% -52% Lantheus Holdings Inc. LNTH Medical Specialties $54.92 $102.00 86% 100% 90% Progyny Inc. PGNY Misc. Commercial Services $31.21 $55.57 78% 100% -38% Coherent Corp. COHR Electronic Equipment/ Instruments $35.41 $60.56 71% 84% -48% Exelixis Inc. EXEL Biotechnology $16.08 $26.07 62% 81% -12% Darling Ingredients Inc. DAR Food: Specialty/ Candy $61.17 $97.36 59% 93% -12% Perrigo Co. PLC PRGO Pharmaceuticals $31.83 $49.25 55% 100% -18%
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