5 Strong Industrial Stocks To Buy Now

Oil fueled gains have turned the tide for stocks since the second half of February. Prices have rebounded to hover near the $40 per barrel mark, sparking off gains for the broader markets. All the indices are now in the black for the year and a record rally shows no signs of abating. Not unsurprisingly, materials and energy stocks have regained much of their earlier popularity with investors.

However, several factors indicate that they may be inherently volatile choices. Instead, it may be better to focus on a sector like industrials which carries none of the inherent risks these sectors suffer from. At this point, the Industrials Sector SPDR (XLI) is up 5.6% year-to-date compared to 0.4% for the S&P 500. This is why picking select materials stocks may be a smart choice at this juncture.

Dollar Dips on Lower Rate Outlook

An unbroken surge in the dollar has been one of the factors contributing to the rise in oil prices. An increase in the dollar makes oil costlier for its importers, who purchase this commodity using foreign currency. However, a rising dollar has a downside for U.S. exporters of other goods.

But the surge in the dollar is likely to snap very quickly. Following a two-day advance, the dollar declined on Monday as traders opined that there was a slim chance of a rate hike in April. Chances of an increase in June have also dimmed. In such an environment, the dollar is likely to move lower. This will certainly be beneficial for most industrial product manufacturers.

Strengthening Economic Environment

The Federal Open Market Committee (FOMC) shied away from raising rates at its recently concluded policy meeting. The FOMC cited fears about a weakening global economy and the pace of price increases for such a move. However, it did acknowledge that risks to the outlook have diminished. Further, the Fed Chair admitted that the economy has strengthened and inflation was improving.

And there is sufficient reason for such a statement. In February, the U.S. economy added 242,000 jobs, easily outpacing the consensus estimate of 194,000. Meanwhile, unemployment remained flat at January’s significantly low level of 4.9%. Several other crucial indicators such as the ISM Manufacturing Index, construction spending and factory orders have shown significant improvements this month.