This has been an eventful week for Wall Street, which suffered a bloodbath on Aug 5. Billions of dollars were wiped out of the market cap of hundreds of companies after a weak jobs report last week reignited fears that the economy might slip into a recession as higher interest rates continue to hurt industries and consumers.

One week down the line, the situation appears to be stabilizing as fresh data showed that jobless claims declined more than expected. Following the release of the report, all three major indexes rebounded, with the S&P 500 and Nasdaq recording their best days since November 2022.

The S&P 500 jumped 119.81 points or 2.2% to close at 5,319.31, while the Nasdaq rose 464.22 points or 2.9% to finish at 16,660.02. The Dow Jones Industrial Average gained 683.04 points, or 1.8%, to end at 39,446.49.

Fears of an impending recession were ignited last week after data showed that only 179,000 jobs were added in July, while the unemployment rate peaked at 4.3%. Investors felt that the Federal Reserve may have held interest rates higher for too long, which has started taking its toll on the economy.

The Fed raised interest rates by 525 basis points to take interest rates to a 23-year-high in the current range of 5.25-5.5% in its desperate attempt to fight sky-high inflation.

Despite the selloff earlier this week, several experts and the Federal Reserve are confident that the economy will make a softer landing and avoid recession, as inflation has been showing signs of declining over the past quarter.

The Federal Reserve is also gearing up to start its rate cut cycle, which is likely to begin in September.

The Fed had earlier indicated only a single 25 basis point rate cut, but cooling inflation has raised hopes of multiple cuts. Markets are now pricing in a 50-basis point rate cut in September, to be followed by two more cuts of 25 and 50 basis points in November and December.

Lower rate cuts mean lower borrowing costs, which typically favor growth stocks such as technology and consumer discretionary.

Our Choices

Given this scenario, we have narrowed our search to four consumer discretionary stocks such asPlayAGS, Inc. AGS, Cinemark Holdings, Inc. CNK, Hilton Grand Vacations Inc. HGV, Royal Caribbean Cruises Ltd. RCL and YETI Holdings, Inc. YETI.

These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PlayAGS, Inc. is a designer and supplier of electronic gaming machines and other products and services for the gaming industry. AGS’ product line-up includes Class III EGMs for commercial and Native American casinos, video bingo machines for select international markets, table game products and interactive social casino products.