The Wall Street rally resumed after a brief period of volatility as investors’ confidence got a boost after the Federal Reserve slashed interest rates last week and signaled more rate cuts this year. On Monday, the S&P 500 hit yet another all-time closing high, while the Nasdaq and Dow hit new all-time intraday highs.
The ongoing rally is once again being driven by tech stocks that have primarily been responsible for the broader market rally over the past couple of years. The S&P 500 has been the biggest gainer this year.
Given the positive sentiment, it would be ideal to invest in S&P 500 stocks, such as Microsoft Corporation MSFT, 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 on a Roll
The S&P 500 advanced 0.4% on Monday to end at 6,693.75 points, to hit an all-time closing high and register its 28th record close of the year. Also, the index recorded consecutive all-time closing highs for the third straight session.
Monday’s rally came as NVIDIA Corporation NVDA said that it will invest up to $100 billion in OpenAI as part of a deal to build data centers. The optimism surrounding AI has been boosting NVIDIA’s shares for quite some time and has been primarily responsible for the broader market rally.
Monday’s announcement reassured investors that the enthusiasm surrounding AI is not over hyped and the field holds a lot of potential that still needs to be explored.
Multiple Factors Boosting S&P 500
The recent rally is also being powered by the investor optimism surrounding rate cuts. Although price pressures continue to build pressure on households, a weak job market compelled the Federal Reserve to finally cut interest rates by 25 basis points last week.
The rate cut was highly anticipated, and the announcement immediately gave a boost to growth stocks. The S&P 500 has had a rollercoaster ride this year, with big swings in both directions.
In February, the index hit a record high on optimism that Trump’s pro-business policies would boost the market. However, by April, stocks tumbled nearly 18% after Trump rolled out sweeping tariffs just weeks into his presidency, raising fears of a global trade war and pushing the index close to a bear market.
The mood shifted once Trump halted the tariffs, began trade talks with U.S. allies, and finalized trade deals with several nations. Since then, the index has been on a steady climb. The S&P 500 is up 3.5% over the past month, and has risen 12.5% so far this year.
Moreover, the Fed has suggested two more rate cuts this year, which is likely to further boost the index.
5 S&P 500 Stocks With Growth Potential
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 suites 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 12.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last 60 days. MSFT presently carries 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 21.5%. The Zacks Consensus Estimate for the current-year earnings has improved 4.7% over the past 60 days. ADI currently has a Zacks Rank #1.
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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Analog Devices, Inc. (ADI): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Arista Networks, Inc. (ANET): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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