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3 Top S&P 500 Stocks to Buy as Index Tastes 4200 Mark

The S&P 500 Index, despite making more than a few attempts, failed to finish above the coveted 4,200 mark since August 2022. Antagonistic debt ceiling negotiations and banks’ credit crunch issues prevented the index from exceeding the desired level. Needless to mention, consumer sentiment has also taken a beating recently amid worries that a recession may be arriving this year.

But for a brief period, the broader index did trade above the 4,200 level last week and is now well positioned to push above it in the near term. This is because President Joe Biden and House Speaker Kevin McCarthy ended their latest discussion over the debt ceiling crisis on an optimistic note.

Kevin McCarthy himself said that it has been a “productive discussion,” which undoubtedly gave hope that the debt ceiling may be raised and the U.S. government won’t run out of cash to pay for its liabilities, thereby preventing the economy from heading into a recession.

Meanwhile, run-on deposits led to the collapse of the Silicon Valley Bank. This led to a contagion effect and, in the end, impacted various other regional lenders, such as Signature Bank and First Republic Bank.

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However, the Federal Reserve has been pumping money into the banking system and has introduced a new Bank Term Funding Program that would protect the lenders in times of distress. Lest we forget, after the Federal Deposit Insurance Corp. took over the Silicon Valley Bank, reserve balances with Federal Reserve Banks did surge.

Let us also admit fears of an imminent recession got dashed, thanks to a stronger-than-expected labor market. Jobs were added at a strong clip last month and reversed a cooling trend. Employers added 253,000 new jobs in April, way more than analysts’ estimate of job additions of 180,000.

At the same time, the jobless rate matched the lowest reading since 1969 as it came in at 3.4% for April, down from 3.5% in March, added the Labor Department (read more: 4 Stocks to Gain as U.S. Job Market Remains on Solid Footing).

Thus, banking on these recent strengths, it’s prudent for investors to place bets on fundamentally sound stocks listed on the S&P 500 Index that are poised to scale upward along with the broader index. These stocks have performed relatively well so far this year.

These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.

McDonald's MCD is a leading fast-food chain that currently operates more than 39,000 restaurants in more than 100 countries. McDonald's has a Zacks Rank #1 and a VGM score of B.

The Zacks Consensus Estimate for its current-year earnings has moved up 5% over the past 60 days. The company’s expected earnings growth rate for the current year is 9.2%. MCD’s shares have already gained 12.2% in the year-to-date period.

W.W. Grainger GWW is a broad-line, business-to-business distributor of maintenance, repair and operating products and services. W.W. Grainger has a Zacks Rank #1 and a VGM score of A.

The Zacks Consensus Estimate for its current-year earnings has moved up 6.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 19.8%. GWW’s shares have already gained 22.6% so far this year.

Cardinal Health CAH is a nationwide drug distributor and provider of services to pharmacies, healthcare providers, and manufacturers. Cardinal Health has a Zacks Rank #2 and a VGM score of A.

The Zacks Consensus Estimate for its current-year earnings has moved up 4.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.3%. CAH’s shares have already gained 11.8% in the year-to-date period.

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McDonald's Corporation (MCD) : Free Stock Analysis Report

Cardinal Health, Inc. (CAH) : Free Stock Analysis Report

W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report

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