We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Volatility to Turn Higher as Inflation Resurfaces: Stocks to Watch
Volatility has a way of creeping up when we least expect it.
The market has been humming along to the earnings and AI narrative over the past month, with stocks hovering near all-time highs. But the latest set of inflation reports could act as a thorn in the rally’s side.
Rate-cut hopes in 2026 dwindled following hotter-than-expected inflation data, with many stocks experiencing heavy selling pressure as a result. Inflation is the biggest risk in this environment amid the Strait of Hormuz blockade, which continues to pressure global energy prices.
The Fed remains stuck as it simply can’t justify lowering interest rates with prices on the rise. In fact, markets are pricing in that the central bank will hold rates steady for most of 2026. There’s even a nearly 30% chance of a rate hike by December.
The volatility (VIX) index appears to be turning back up in mid-May. Bulls would like to avoid a breakout in the VIX index, as a rise in volatility tends to coincide with lower stock prices. Early in Thursday’s trading, small-caps (as evidenced by the Russell 2000 index) were lagging on inflation worries.
CPI Shows Inflation Jumps to 3-Year High
Tuesday’s release of the consumer price index (CPI) showed prices rose 0.6% in April over the previous month and 3.8% year-over-year. The annual figure was a big jump from the 3.3% pace we saw in March and marked the highest level in nearly 3 years.
On a “core” basis, which strips out volatile food and energy components, the CPI rose 0.4% on the month and 2.8% over the last year, the latter of which was also above estimates.
Earlier this week, Chicago Fed president Austan Goolsbee said that not only is inflation unable to make substantial progress, but it’s also going in the opposite direction. “It’s going the wrong way, not just in oil-related things and not just in tariff-related things,” Goolsbee said. “Now you’ve seen drifting upward of services inflation, and for me, that’s the part that I’m nervous about.”
Yesterday’s release of the producer price report only added to concerns. US producer prices increased much more than expected last month, according to the Bureau of Labor Statistics. Wholesale prices rose 1.4% over the prior month, far above the anticipated increase of 0.5%. On an annual basis, producer prices shot up 6% in April, well above projections of 4.8%.
Stocks to Watch Amid Inflation Revival
Fertilizer stocks have been quietly showing strength this year as inflation rises. The Zacks Fertilizers industry currently ranks in the top 11% out of approximately 250 Zacks Ranked Industries. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market.
Quantitative research studies have shown that roughly half of a stock's price movement can be attributed to its industry group. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
Companies in this group are relatively undervalued and are expected to experience above-average earnings growth, signifying a powerful combination that should lead to higher prices ahead:
Image Source: Zacks Investment Research
CF Industries (CF - Free Report) is a component of this group and a Zacks Rank #1 (Strong Buy). The company is the world's largest producer of ammonia, specializing in manufacturing hydrogen and nitrogen products for fertilizer, clean energy, and emissions control. Shares have steadily outperformed this year, advancing more than 63%:
Image Source: StockCharts
Another leading stock in this industry is Intrepid Potash (IPI - Free Report) , a Zacks Rank #2 (Buy). The company is the largest U.S. producer of potassium chloride, acting as a key supplier for agricultural fertilizer, animal feed, and industrial applications.
IPI stock continues to trend upward, climbing more than 63% year-to-date:
Image Source: StockCharts
Fertilizer stocks often rise during periods of high inflation because they are closely tied to agricultural commodity prices and energy costs, which typically surge during inflationary environments. Both companies recently beat their respective first-quarter earnings estimates and are witnessing positive revisions in the quarters ahead.
Bottom Line
The month of April will go down as the 62nd consecutive month inflation came in above the Fed's 2% target. At some point, the word "transitory" stops being an appropriate description to use. In a nutshell, the Fed has a real problem.
Still, that hasn’t stopped stocks from forging higher amid an AI spending boom and earnings acceleration. But we may be near a critical turning point as inflation continues to rise. Make sure to take advantage of all that Zacks has to offer to uncover leading stocks like CF and IPI.
Disclosure: The author may a hold a related interest in the aforementioned securities.
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report
predicting the 7 stocks that will soar highest in the coming month.
View the Zacks #1 Rank List
Image: Bigstock
Volatility to Turn Higher as Inflation Resurfaces: Stocks to Watch
Volatility has a way of creeping up when we least expect it.
The market has been humming along to the earnings and AI narrative over the past month, with stocks hovering near all-time highs. But the latest set of inflation reports could act as a thorn in the rally’s side.
Rate-cut hopes in 2026 dwindled following hotter-than-expected inflation data, with many stocks experiencing heavy selling pressure as a result. Inflation is the biggest risk in this environment amid the Strait of Hormuz blockade, which continues to pressure global energy prices.
The Fed remains stuck as it simply can’t justify lowering interest rates with prices on the rise. In fact, markets are pricing in that the central bank will hold rates steady for most of 2026. There’s even a nearly 30% chance of a rate hike by December.
The volatility (VIX) index appears to be turning back up in mid-May. Bulls would like to avoid a breakout in the VIX index, as a rise in volatility tends to coincide with lower stock prices. Early in Thursday’s trading, small-caps (as evidenced by the Russell 2000 index) were lagging on inflation worries.
CPI Shows Inflation Jumps to 3-Year High
Tuesday’s release of the consumer price index (CPI) showed prices rose 0.6% in April over the previous month and 3.8% year-over-year. The annual figure was a big jump from the 3.3% pace we saw in March and marked the highest level in nearly 3 years.
On a “core” basis, which strips out volatile food and energy components, the CPI rose 0.4% on the month and 2.8% over the last year, the latter of which was also above estimates.
Earlier this week, Chicago Fed president Austan Goolsbee said that not only is inflation unable to make substantial progress, but it’s also going in the opposite direction. “It’s going the wrong way, not just in oil-related things and not just in tariff-related things,” Goolsbee said. “Now you’ve seen drifting upward of services inflation, and for me, that’s the part that I’m nervous about.”
Yesterday’s release of the producer price report only added to concerns. US producer prices increased much more than expected last month, according to the Bureau of Labor Statistics. Wholesale prices rose 1.4% over the prior month, far above the anticipated increase of 0.5%. On an annual basis, producer prices shot up 6% in April, well above projections of 4.8%.
Stocks to Watch Amid Inflation Revival
Fertilizer stocks have been quietly showing strength this year as inflation rises. The Zacks Fertilizers industry currently ranks in the top 11% out of approximately 250 Zacks Ranked Industries. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market.
Quantitative research studies have shown that roughly half of a stock's price movement can be attributed to its industry group. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
Companies in this group are relatively undervalued and are expected to experience above-average earnings growth, signifying a powerful combination that should lead to higher prices ahead:
Image Source: Zacks Investment Research
CF Industries (CF - Free Report) is a component of this group and a Zacks Rank #1 (Strong Buy). The company is the world's largest producer of ammonia, specializing in manufacturing hydrogen and nitrogen products for fertilizer, clean energy, and emissions control. Shares have steadily outperformed this year, advancing more than 63%:
Image Source: StockCharts
Another leading stock in this industry is Intrepid Potash (IPI - Free Report) , a Zacks Rank #2 (Buy). The company is the largest U.S. producer of potassium chloride, acting as a key supplier for agricultural fertilizer, animal feed, and industrial applications.
IPI stock continues to trend upward, climbing more than 63% year-to-date:
Image Source: StockCharts
Fertilizer stocks often rise during periods of high inflation because they are closely tied to agricultural commodity prices and energy costs, which typically surge during inflationary environments. Both companies recently beat their respective first-quarter earnings estimates and are witnessing positive revisions in the quarters ahead.
Bottom Line
The month of April will go down as the 62nd consecutive month inflation came in above the Fed's 2% target. At some point, the word "transitory" stops being an appropriate description to use. In a nutshell, the Fed has a real problem.
Still, that hasn’t stopped stocks from forging higher amid an AI spending boom and earnings acceleration. But we may be near a critical turning point as inflation continues to rise. Make sure to take advantage of all that Zacks has to offer to uncover leading stocks like CF and IPI.
Disclosure: The author may a hold a related interest in the aforementioned securities.