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Image: Shutterstock featured highlights include: Sanderson Farms, Abbott Lab, Caterpillar, CNA Financial and Acushnet Holdings

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For Immediate Release

Chicago, IL – February 22, 2021 – Stocks in this week’s article are Sanderson Farms Inc. (SAFM - Free Report) , Abbott Laboratories (ABT - Free Report) , Caterpillar Inc. (CAT - Free Report) , CNA Financial Corp. (CNA - Free Report) and Acushnet Holdings Corp. (GOLF - Free Report) .

Protect Your Portfolio from Volatility with 5 Low-Beta Picks

Wall Street has been grappling with volatility since the beginning of this week. Although the overall movement of the market has continued to be northbound so far this year after an impressive rally in pandemic-ridden 2020, volatility was rife in the first two months of 2021 resulting in market fluctuations.

January's volatility was the result of a typical trading practice in which a few key heavily shorted stocks by hedge fund giants were favored by a group of individual investors organized via Reddit’s wallstreetbets forum. However, in February, volatility resulted from lingering problems in the U.S. labor market, spike in benchmark Treasury Note yield and inflationary expectations.

At this juncture, it will be prudent to invest in low-beta (beta value less than 1 but greater than zero) stocks with a favorable Zacks Rank as these will be less volatile than the broader market.

Labor Market  Continues to Struggle

The labor market, which was the best-performing segment of the U.S. economy before the outbreak of coronavirus, suffered the most during the pandemic. Although most of the segments of the economy are showing signs of recovery albeit at a slow pace, the labor market is still in jeopardy.

On Feb 18, the Department of Labor reported that weekly jobless claims for the week ended Feb 13 rose 13,000 to 861,000, the highest level in a month, and above the consensus estimate of 766,000. Previous week's data was also revised upward to 848,000 from 793,000 reported earlier. Before the outbreak of the pandemic, weekly jobless claims were hovering around 200,000.

Moreover, another 516,299 applicants filed for initial claims last week through a temporary federal-relief program. Combining these two claims, the government received nearly 1.38 million jobless benefit applications last week. Notably, combined claims have stayed above 1 million since May 2020.

Inflation Expectations

Inflation expectations are currently at the highest level since 2014 as market participants are discounting  the effects of ongoing nationwide deployment of COVID-19 vaccines and President Joe Biden's proposed $1.9 trillion fresh coronavirus-aid package.

Vaccination will result in reopening of the U.S. economy that has been operating at a sub-optimal level since the outbreak of the virus in March 2020. Moreover, the fresh fiscal stimulus will help realize pent-up demand of  American consumers, thereby boosting the GDP. Notably, retail sales climbed 5.3% in January against a drop of 1% in December, buoyed by Congressional approval of a $900 billion stimulus at the end of 2020.

Higher inflation may compel the Fed to readjust its current benchmark interest rate at 0-0.25%, which the central bank otherwise had thought of maintaining up to 2023.

Spike in Treasury Note Yields

The two positives mentioned above have driven Wall Street's northbound journey so far this year after an astonishing rally defying coronavirus-led devastations. The situation prompted investors to shift the allotment of  funds from safe-haven government bonds to risky equities.

Consequently, the yield on the benchmark 10-year US Treasury Note is around 1.3% for the first time since February 2020 and the yield on 30-year US Treasury Note is hovering near 2%, its highest level in a year.

A section of economists and financial experts, especially those who believe that the stock market is currently overvalued, have warned that further rise in government bond yields may trigger the exit button from risky equities to bonds.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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