Today's 3 Best Stocks

Before you go, we thought you'd like these...
Before you go close icon

What a difference a better explanation makes!

After a month of topsy-turvy trading on the heels of comments from the Federal Reserve that it may soon scale back QE3 -- its $85 billion monthly bond-buying program meant to keep lending rates near historic lows -- Ben Bernanke did his best mea culpa to calm the markets. With economic data signaling the potential for further stimulus, Bernanke's comments helped calm skittish markets into one of the best gains of the year -- and, subsequently, another record high for the broad-based S&P 500 .

By the end of the day, the S&P 500 had eclipsed yet another all-time record closing high, rising by 22.40 points (1.36%), to close at 1,675.02. This also marked its 10th gain in the past 12 sessions, and completely wiped out June's minor correction.

Leading today's big gains is semiconductor chip maker Advanced Micro Devices , which leapt 11.8% after two analyst rating upgrades. Vivek Arya at Bank of America/Merrill Lynch upped his rating on AMD to buy, from underperform, while boosting his price target to $6, from $2.50. Similarly, Canaccord Genuity analyst Bobby Burleson raised his rating to buy, from hold, and upped his price target to $5, from $3. Based on yesterday's closing value, both price targets implied upside of 51% and 26%, respectively. With key processing wins in both new gaming consoles, the Xbox One and PlayStation 4, AMD's fortunes could be just months from turning around.

The other two big gainers were again the nation's largest homebuilder D.R. Horton , which added 9.2%, and Lennar , the homebuilder with the best margins in the sector, which advanced 8.3%. As you might imagine, the impetus behind the move are the comments made by Bernanke that the U.S. central bank doesn't have any intention of scaling back QE3 anytime soon. The Fed's monetary easing has been a big reason why 30-year mortgage rates have remained at historic lows, and are one reason the housing sector found a bottom. If QE3 is continued for a longer period of time than the Street expects, it should keep rates near historic lows, and spur home buying.

Call me a bit skeptical, though, as it seems more like trying to squeeze blood out of a turnip. Even if the Federal Reserve extends QE3 for a few months, we're still looking at the inevitable paring back of its bond purchases, and the likely return of interest rates to their historical norm, which could cripple the now-spoiled U.S. consumer. I'd tread this sector with extreme caution.

Despite the S&P 500 again reaching new highs today, investors and pundits alike are skeptical about future growth... but in most cases, they shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

The article Today's 3 Best Stocks originally appeared on

Fool contributor  Sean Williams  owns shares of Bank of America, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle  @TMFUltraLong . The Motley Fool owns shares of, and recommends, Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

People are Reading