Markets Face Key Test Ahead of Fed Decision: Stocks to Watch

Group 1: Market Overview - Major U.S. market indexes are experiencing a summer pullback, with a shift in focus towards August and corporate earnings, particularly in the tech sector [1] - The U.S. economy grew at an annualized pace of 2.8% in Q2, surpassing the expected 2% growth [1] - Interest rate-sensitive areas of the market are showing renewed strength as the Fed approaches its first interest rate cut of the cycle [1] Group 2: Inflation Trends - The Personal Consumption Expenditures (PCE) index for June showed a year-over-year price increase of 2.5%, aligning with economists' projections [2] - The core PCE, which excludes food and energy costs, rose 2.6% year-over-year, marking the slowest annual increase in over three years [2] - Fed Chair Jerome Powell indicated that the central bank is likely to cut rates soon, although he is waiting for more confirmation on inflation reaching the 2% target [2][3] Group 3: Homebuilder Industry Performance - Interest-rate sensitive homebuilders have surged over 20% in July due to low existing housing inventory and a favorable rate outlook [4] - The Zacks Building Products – Homebuilder industry is ranked in the top 14% of approximately 250 industry groups, indicating strong future performance potential [5] - D.R. Horton reported fiscal Q3 earnings of $4.10/share, a 7.9$10 billion, a 2% increase from the prior year [6] - PulteGroup reported Q2 earnings of $3.58/share, reflecting an 11.5$4.6 billion, up 9.8% from the previous year [7] Group 4: Investment Strategy - Investors are advised to be selective and target stocks breaking out of proper bases while diversifying into leading industries [8] - Other market sectors outside of tech are showing strength, suggesting a broadening rally [8]