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5 Solid Stocks to Gain on Signs of Inflation Cooling Down
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The annual rate of inflation dropped to its lowest level in more than two years in June. The consumer price index (CPI) rose by 3% year over year in June, per the Bureau of Labor Statistics.
The yearly rate of inflation not only decelerated from 4% in the prior month but was also the lowest since March 2021. It’s also a touch less than analysts’ estimate of an increase of 3.1%. Prices increased by 0.2% month over month, but that’s also less than analysts’ estimate of an increase of 0.3%.
Most importantly, the core CPI, which strips out volatile energy and food prices rose 4.8% over the past 12 months, its lowest annual rate of increase since October 2021. On a monthly basis, the core CPI increased 0.2%, less than analysts’ forecast of a 0.3% gain.
Price pressures cooled down for the 12th successive month in June largely due to unchanged grocery prices, and a decline in prices of used cars and airline fares. Prices of used vehicles slipped by 0.5% in June, while the cost of air tickets tanked by 8.1% and fell for the third straight month.
Food prices may have increased in June, but that’s way less than year-ago prices. In reality, the cost of indispensable goods and services is coming down. It has now more than halved after touching a 40-year high of 9.1% last year.
Now, despite inflation weakening, traders are betting that it may not dissuade the Federal Reserve from hiking interest rates in July. But they do believe the central bank will pause interest rate increases after the July meeting, something that should bode well for the broader stock market.
This is because rate hike pauses improve consumer outlays, decrease the cost of borrowings, and boost economic growth. In fact, due to the cooler-than-expected June inflation report, the three major U.S. bourses closed higher for the third straight session on Jul 12. The teach-laden Nasdaq, in particular, led the way as inflation showed signs of slowing.
And why not? The possibility of a rate hike pause soon lifted tech shares. An increase in interest rates adversely impacts a tech company’s future cash inflows, curtailing their reinvestments into innovation and hindering growth.
But it’s not only tech shares that are currently moving northward. Shares of consumer discretionary companies are also gaining. After all, consumers will be in a much better position to splurge on nonobligatory items as inflation cools down and rate hikes pause.
Thus, from an investment perspective, we have highlighted five stocks from the aforesaid areas that are most likely to make the most of less inflationary pressure. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).
The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
InterDigital (IDCC - Free Report) is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. InterDigital, currently, has a Zacks Rank #1 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 62.6% over the past 60 days. IDCC’s expected earnings growth rate for the current year is 163.2%.
Meta Platforms (META - Free Report) is the world’s largest social media platform. Meta Platforms, currently, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 30 days. META’s expected earnings growth rate for the current year is 21.8%.
Perion Network (PERI - Free Report) is a global technology company that delivers online advertising solutions and search monetization to brands and publishers. Perion Network, currently, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 1.4% over the past 60 days. PERI’s expected earnings growth rate for the current year is 16.6%.
Wynn Resorts (WYNN - Free Report) is a leading developer, owner, and operator of casino resorts. Wynn Resorts, presently, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 30.1% over the past 60 days. WYNN’s expected earnings growth rate for the current year is 141.6%.
Carnival (CCL - Free Report) operates as a cruise and vacation company. Carnival, at the moment, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 34.5% over the past 60 days. CCL’s expected earnings growth rate for the current year is 95.9%.
Shares of InterDigital, Meta Platforms, Perion Network, Wynn Resorts, and Carnival, by the way, have gained 95%, 148%, 43.4%, 32%, and 126.1%, respectively, so far this year.
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5 Solid Stocks to Gain on Signs of Inflation Cooling Down
The annual rate of inflation dropped to its lowest level in more than two years in June. The consumer price index (CPI) rose by 3% year over year in June, per the Bureau of Labor Statistics.
The yearly rate of inflation not only decelerated from 4% in the prior month but was also the lowest since March 2021. It’s also a touch less than analysts’ estimate of an increase of 3.1%. Prices increased by 0.2% month over month, but that’s also less than analysts’ estimate of an increase of 0.3%.
Most importantly, the core CPI, which strips out volatile energy and food prices rose 4.8% over the past 12 months, its lowest annual rate of increase since October 2021. On a monthly basis, the core CPI increased 0.2%, less than analysts’ forecast of a 0.3% gain.
Price pressures cooled down for the 12th successive month in June largely due to unchanged grocery prices, and a decline in prices of used cars and airline fares. Prices of used vehicles slipped by 0.5% in June, while the cost of air tickets tanked by 8.1% and fell for the third straight month.
Food prices may have increased in June, but that’s way less than year-ago prices. In reality, the cost of indispensable goods and services is coming down. It has now more than halved after touching a 40-year high of 9.1% last year.
Now, despite inflation weakening, traders are betting that it may not dissuade the Federal Reserve from hiking interest rates in July. But they do believe the central bank will pause interest rate increases after the July meeting, something that should bode well for the broader stock market.
This is because rate hike pauses improve consumer outlays, decrease the cost of borrowings, and boost economic growth. In fact, due to the cooler-than-expected June inflation report, the three major U.S. bourses closed higher for the third straight session on Jul 12. The teach-laden Nasdaq, in particular, led the way as inflation showed signs of slowing.
And why not? The possibility of a rate hike pause soon lifted tech shares. An increase in interest rates adversely impacts a tech company’s future cash inflows, curtailing their reinvestments into innovation and hindering growth.
But it’s not only tech shares that are currently moving northward. Shares of consumer discretionary companies are also gaining. After all, consumers will be in a much better position to splurge on nonobligatory items as inflation cools down and rate hikes pause.
Thus, from an investment perspective, we have highlighted five stocks from the aforesaid areas that are most likely to make the most of less inflationary pressure. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).
The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
InterDigital (IDCC - Free Report) is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. InterDigital, currently, has a Zacks Rank #1 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 62.6% over the past 60 days. IDCC’s expected earnings growth rate for the current year is 163.2%.
Meta Platforms (META - Free Report) is the world’s largest social media platform. Meta Platforms, currently, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 30 days. META’s expected earnings growth rate for the current year is 21.8%.
Perion Network (PERI - Free Report) is a global technology company that delivers online advertising solutions and search monetization to brands and publishers. Perion Network, currently, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 1.4% over the past 60 days. PERI’s expected earnings growth rate for the current year is 16.6%.
Wynn Resorts (WYNN - Free Report) is a leading developer, owner, and operator of casino resorts. Wynn Resorts, presently, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 30.1% over the past 60 days. WYNN’s expected earnings growth rate for the current year is 141.6%.
Carnival (CCL - Free Report) operates as a cruise and vacation company. Carnival, at the moment, has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for its current-year earnings has moved up 34.5% over the past 60 days. CCL’s expected earnings growth rate for the current year is 95.9%.
Shares of InterDigital, Meta Platforms, Perion Network, Wynn Resorts, and Carnival, by the way, have gained 95%, 148%, 43.4%, 32%, and 126.1%, respectively, so far this year.