Rate Cut Hope Soars on Soft Economic Data: 5 Mid-Cap Tech Picks

Economic Indicators - Average hourly earnings increased by 0.3% in June and 3.9% year-over-year, consistent with estimates, while May's figures were 0.4% and 4% respectively [1] - The core personal consumption expenditure (PCE) price index rose by 0.1% month-over-month in May, down from 0.3% in April, with year-over-year core PCE inflation at 2.6% compared to 2.8% in April [2] - The U.S. economy added 206,000 jobs in June, exceeding the consensus estimate of 190,000, but lower than May's 218,000 [5] - The unemployment rate unexpectedly rose to 4.1%, surpassing the consensus estimate of 4%, marking the highest level since October 2021 [6] - The manufacturing purchasing managers' index (PMI) was reported at 48.5% in June, down from 48.7% in May, indicating contraction [7] Interest Rate Expectations - Wall Street participants have become optimistic about potential interest rate cuts by the Fed, with a 78% probability of a 25 basis points cut in September, up from 62% a week prior [4] - Economists are urging the Fed to consider rate cuts to prevent a potential recession, given the recent soft economic data [10] - A lower interest rate environment is expected to benefit growth sectors, particularly technology, which has been a significant driver of the U.S. stock market rally [11][8] Technology Sector Insights - The ongoing tech rally is largely driven by advancements in artificial intelligence (AI), particularly generative AI, with some technology stocks experiencing gains of 100-200% over the past year [9] - Five mid-cap technology stocks have been identified as having strong potential for growth in 2024, with positive earnings estimate revisions in the last 60 days [14] Company Highlights - Paycom Software Inc. (PAYC) is experiencing growth due to new client additions and a focus on cross-selling, with an expected revenue growth of 10.2% for the current year [21][22] - Dropbox Inc. (DBX) offers a content collaboration platform and has an expected revenue growth rate of 1.7% for the current year, with a 5.5% improvement in earnings estimates over the last 60 days [16][17] - Impinj Inc. (PI) operates a cloud connectivity platform and has an expected revenue growth rate of 3.3% for the current year, with a significant 33.8% improvement in earnings estimates [18][25] - CACI International Inc. (CACI) provides technology solutions for national security and government modernization, with an expected revenue growth rate of 15.1% for the current year [19][20] - GitLab Inc. (GTLB) offers a DevOps platform with an expected revenue growth rate of 26.7% and a 70% growth in earnings for the current year [23][24]