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Inflation, regrettably, turned higher to begin 2023. From gas to fuel to shelter, prices have scaled upward and hurt American consumers. The Labor Department noted that the consumer price index (CPI), which primarily encompasses the broader basket of goods and services, increased 0.5% in January and resulted in a year-over-year gain of 6.4%. However, analysts were mostly expecting a month-over-month gain of 0.4% and an annual gain of 6.2%.
Most importantly, the core CPI, which eliminates volatile energy and food prices, advanced 0.4% in January and 5.6% compared to a year ago. But market pundits had forecast the core CPI to increase 0.3% monthly and 5.5% from a year ago. The U.S. Bureau of Labor Statistics highlighted that the increase in shelter costs mostly led to an uptick in overall inflation.
Shelter costs, which account for more than one-third of the CPI, increased 0.7% in January and were up 7.9% year over year. Energy and food costs were also major contributors. While energy prices were up 2% monthly and 8.7% from a year ago, food costs increased 0.5% monthly and 10.1% annually, added the U.S. Bureau of Labor Statistics.
Consequently, inflation continues to remain stubbornly higher so far this year, even though it had shown signs of easing in the latter half of last year. But hotter-than-anticipated inflation raised worries about a more aggressive Fed. After all, the central bank officials are bent on taming the rise in prices of indispensable goods and services and henceforth may be bound to remain hawkish.
According to the CME’s FedWatch tool, market pundits are now factoring in 74.3% odds of a 25 basis points hike in interest rates in May, as well as in June, thanks to the more-than-expected increase in January’s inflation. Anyhow the odds of a further increase in interest rates this year have already increased due to January’s blowout employment report. All in all, investors do expect interest rates to increase above 5% and continue to hover at that level until 2024.
Unfortunately, rate hikes don’t bode well for the economy, which, at the moment, is facing the threat of an imminent recession. Rate hikes impact consumers’ spending habits, increase borrowing costs and deter economic growth. Perhaps that’s the reason why major indexes like the S&P 500 and the Dow slipped on Feb 14 after inflation turned higher than projected.
But investors shouldn’t freak out! On the contrary, they should place their bets on stocks that provide risk-adjusted returns like Conagra Brands (CAG - Free Report) , Campbell Soup (CPB - Free Report) , NRG Energy (NRG - Free Report) , Global Water Resources (GWRS - Free Report) and MGE Energy (MGEE - Free Report) .
These stocks are part of the consumer staples and utility sectors, or in other words, whose businesses are non-cyclical in nature, making them immune to market vagaries. Additionally, they are dividend players indicating better quality business, which helps them bear market volatility. To top it off, they are low-beta (ranges from 0 to 1) stocks making them less unstable compared to the broader market. These stocks also boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Conagra Brands is one of the leading branded food companies in North America. The company has a beta of 0.56 and a Zacks Rank #1.
CAG has a dividend yield of 3.6%. The Zacks Consensus Estimate for its current-year earnings has moved up 9% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.7%.
Campbell Soup is a worldwide manufacturer and marketer of high-quality, branded convenience food products. The company has a beta of 0.36 and a Zacks Rank #2.
CPB has a dividend yield of 2.9%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 4.9%.
NRG Energy is engaged in the production, sale, and delivery of energy and energy products and services to residential, industrial as well as commercial consumers in major competitive power markets in the United States. The company has a beta of 0.98 and a Zacks Rank #2.
NRG has a dividend yield of 4.3%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.6% over the past 30 days. The company’s expected earnings growth rate for the current year is 45.9%.
Global Water Resources is a water resource management company. The company has a beta of 0.72 and a Zacks Rank #2.
GWRS has a dividend yield of 2.1%. The Zacks Consensus Estimate for its current-year earnings has moved up 9.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 43.8%.
MGE Energy is a public utility holding company. Its principal subsidiary, MGE, generates and distributes electricity. The company has a beta of 0.71 and a Zacks Rank #1.
MGEE has a dividend yield of 2.3%. The Zacks Consensus Estimate for its next-year earnings has moved up 1.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 7.5%.
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Hotter-Than-Expected Inflation Rattles Wall Street: 5 Safe Picks
Inflation, regrettably, turned higher to begin 2023. From gas to fuel to shelter, prices have scaled upward and hurt American consumers. The Labor Department noted that the consumer price index (CPI), which primarily encompasses the broader basket of goods and services, increased 0.5% in January and resulted in a year-over-year gain of 6.4%. However, analysts were mostly expecting a month-over-month gain of 0.4% and an annual gain of 6.2%.
Most importantly, the core CPI, which eliminates volatile energy and food prices, advanced 0.4% in January and 5.6% compared to a year ago. But market pundits had forecast the core CPI to increase 0.3% monthly and 5.5% from a year ago. The U.S. Bureau of Labor Statistics highlighted that the increase in shelter costs mostly led to an uptick in overall inflation.
Shelter costs, which account for more than one-third of the CPI, increased 0.7% in January and were up 7.9% year over year. Energy and food costs were also major contributors. While energy prices were up 2% monthly and 8.7% from a year ago, food costs increased 0.5% monthly and 10.1% annually, added the U.S. Bureau of Labor Statistics.
Consequently, inflation continues to remain stubbornly higher so far this year, even though it had shown signs of easing in the latter half of last year. But hotter-than-anticipated inflation raised worries about a more aggressive Fed. After all, the central bank officials are bent on taming the rise in prices of indispensable goods and services and henceforth may be bound to remain hawkish.
According to the CME’s FedWatch tool, market pundits are now factoring in 74.3% odds of a 25 basis points hike in interest rates in May, as well as in June, thanks to the more-than-expected increase in January’s inflation. Anyhow the odds of a further increase in interest rates this year have already increased due to January’s blowout employment report. All in all, investors do expect interest rates to increase above 5% and continue to hover at that level until 2024.
Unfortunately, rate hikes don’t bode well for the economy, which, at the moment, is facing the threat of an imminent recession. Rate hikes impact consumers’ spending habits, increase borrowing costs and deter economic growth. Perhaps that’s the reason why major indexes like the S&P 500 and the Dow slipped on Feb 14 after inflation turned higher than projected.
But investors shouldn’t freak out! On the contrary, they should place their bets on stocks that provide risk-adjusted returns like Conagra Brands (CAG - Free Report) , Campbell Soup (CPB - Free Report) , NRG Energy (NRG - Free Report) , Global Water Resources (GWRS - Free Report) and MGE Energy (MGEE - Free Report) .
These stocks are part of the consumer staples and utility sectors, or in other words, whose businesses are non-cyclical in nature, making them immune to market vagaries. Additionally, they are dividend players indicating better quality business, which helps them bear market volatility. To top it off, they are low-beta (ranges from 0 to 1) stocks making them less unstable compared to the broader market. These stocks also boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Conagra Brands is one of the leading branded food companies in North America. The company has a beta of 0.56 and a Zacks Rank #1.
CAG has a dividend yield of 3.6%. The Zacks Consensus Estimate for its current-year earnings has moved up 9% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.7%.
Campbell Soup is a worldwide manufacturer and marketer of high-quality, branded convenience food products. The company has a beta of 0.36 and a Zacks Rank #2.
CPB has a dividend yield of 2.9%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 4.9%.
NRG Energy is engaged in the production, sale, and delivery of energy and energy products and services to residential, industrial as well as commercial consumers in major competitive power markets in the United States. The company has a beta of 0.98 and a Zacks Rank #2.
NRG has a dividend yield of 4.3%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.6% over the past 30 days. The company’s expected earnings growth rate for the current year is 45.9%.
Global Water Resources is a water resource management company. The company has a beta of 0.72 and a Zacks Rank #2.
GWRS has a dividend yield of 2.1%. The Zacks Consensus Estimate for its current-year earnings has moved up 9.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 43.8%.
MGE Energy is a public utility holding company. Its principal subsidiary, MGE, generates and distributes electricity. The company has a beta of 0.71 and a Zacks Rank #1.
MGEE has a dividend yield of 2.3%. The Zacks Consensus Estimate for its next-year earnings has moved up 1.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 7.5%.