5 Stocks to Buy on S&P 500's 16th Record Closing High of the Year

The Wall Street rally gathered further steam on Tuesday, which saw the S&P 500 and the Nasdaq close at a new record high after fresh data showed inflation rose less than expected. The S&P 500 particularly had a remarkable journey this year.

The index has bounced back strongly after coming close to a bear market in April and has been hitting fresh highs over the past month. The recent S&P 500 rally is driven by renewed optimism surrounding rate cuts and massive investment in tech on the domestic front.

Given the positive sentiment, it would be ideal to invest in S&P 500 stocks, such as Adobe Inc. ADBE, Microsoft Corporation MSFT, Broadcom Inc. AVGO, Analog Devices, Inc. ADI and Arista Networks, Inc. ANET, which have strong potential in 2025. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

S&P 500 Hits New Record High

The S&P 500 jumped 1.1% on Tuesday to end at 6,445.76 points, a new record closing high. This is the index’s seventh record close in less than a month. This was also the index’s 16th record close of the year.

Tuesday’s rally came after fresh data showed that inflation increased less than expected. The consumer price index rose 0.2% sequentially in July after increasing 0.3% in May, and missed analysts’ expectations of a rise of 0.3%. Year over year, CPI rose 2.7% in July, also lower than the consensus estimate of a rise of 2.8%.

Core CPI, which strips out the volatile food and energy prices, increased 0.3% in July, in line with the consensus estimate. On a year-over-year basis, core CPI rose 3.1%, slightly higher than analysts’ expectations of a 3% rise.

Concerns grew over the past few months that President Donald Trump’s tariffs could push up prices of goods, which could weigh on the economy. However, the CPI reading alleviated those fears to a great extent, raising hopes of a rate cut in September. This sent stocks on a rally, taking the S&P 500 higher. 

Market participants are now pricing in a 94% chance of a 25-basis point rate cut in September, according to the CME’s FedWatch Tool. This was 85% before the release of the CPI report.

Investor Optimism Helping S&P 500

The S&P 500 has had a stellar year so far, marked by sharp ups and downs. After reaching a record high in February on hopes that Trump’s pro-business agenda would lift the market, the index nosedived in April.

The decline came after Trump, weeks into his presidency, announced extensive tariffs, sparking fears of a global trade war.

By April, stocks had plunged nearly 18% for the year, taking the index close to bear market territory. The tide turned when Trump temporarily suspended the tariffs and opened trade negotiations with U.S. allies, and finalized trade deals with several countries.

From that point onward, the index has maintained a strong upward trajectory. The S&P 500 has gained 2.8% in the past month and 9.6% year to date.

5 S&P 500 Stocks With Growth Potential

Adobe Inc.

Adobe Inc. is one of the largest software companies in the world. ADBE picks up licensing fees from customers, which form the bulk of its revenues. Adobe also offers technical support and education that account for the balance.

Adobe has an expected earnings growth rate of 12% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.9% over the past 60 days. ADBE presently has a Zacks Rank #2.

Microsoft Corporation

Microsoft Corporation is one of the largest broad-based technology providers in the world. MSFT dominates the PC software market, with more than 73% of the market share for desktop operating systems. Microsoft Corporation’s Microsoft 365 application suite is one of the most popular productivity software globally. MSFT is also one of the prominent public cloud providers that can deliver a wide variety of infrastructure-as-a-service and platform-as-a-service solutions at scale.

Microsoft Corporation has an expected earnings growth rate of 12.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 60 days. MSFT presently carries a Zacks Rank #2.

Broadcom Inc.

Broadcom Inc. is a premier designer, developer and global supplier of a broad range of semiconductor devices, with a focus on complex digital and mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products. AVGO’s semiconductor solutions are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays.

Broadcom’s expected earnings growth rate for the current year is 36.1%. The Zacks Consensus Estimate for the current-year earnings has improved 0.2% over the past 60 days. AVGO currently has a Zacks Rank #2.

Analog Devices, Inc.

Analog Devices, Inc. is an original equipment manufacturer of semiconductor devices, specifically, analog, mixed signal and digital signal processing (DSP) integrated circuits. ADI’s product line is composed of amplifiers and comparators; analog to digital converters; digital to analog converters; video encoders and decoders; embedded processing products and DSPs; MEMS and temperature sensors; RF/IF components and converters; power and thermal management ICs, audio/video converters, amplifiers, CODECs, filters and processors.

Analog Devices’ expected earnings growth rate for the current year is 16%. The Zacks Consensus Estimate for the current-year earnings has improved 0.1% over the past 60 days. ADI currently has a Zacks Rank #2.

Arista Networks

Arista Networks, Inc. is engaged in providing cloud networking solutions for data centers and cloud computing environments. ANET offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for the next-generation data center networks. Arista uses multiple silicon architectures across its products.

Arista Networks’ expected earnings growth rate for the current year is 23.8%. The Zacks Consensus Estimate for current-year earnings improved 9.8% over the past 60 days. ANET presently has a Zacks Rank #1.

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