JPMorgan: Market stuck, buy energy stocks

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JPMorgan told clients Thursday that the S&P 500 is going nowhere for the rest of the year, but there are some parts of the market set to rally, namely energy and materials stocks.

"The path forward likely remains range bound as investors are caught in a tug of war between weak fundamentals and exhausted technicals, on the one hand, and expectations of a more dovish Fed and stabilizing USD on the other," JPMorgan U.S. equity strategist Dubravko Lakos-Bujas wrote in a note Thursday. He noted that Wednesday's hawkish Fed minutes put the bullish part of this balance at risk.

First-quarter S&P 500 earnings beat expectations by 3 percentage points, but overall, profits were still down 7 percent year over year. This result was not good enough to turn around the poor fundamental outlook for the in aggregate, according to strategist.

"At the sector level, our highest conviction longs remain energy, materials and precious metals, while our highest conviction short remains consumer discretionary," stated the report.

Lakos-Bujas favors energy stocks because he believes investors are likely to rotate into the sector on "improving earnings visibility and positive earnings revisions" from rising oil prices and better credit markets. And the strategist is also bullish on materials stocks due to the sector's exposure to improving trends in the U.S. construction and housing industry.

On the flip side, the firm is bearish on consumer discretionary names as they will suffer from higher labor costs going forward.

Here are seven JPMorgan "overweight" rated energy and materials stock ideas.