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5 Solid Stocks to Buy as Inflation Continues to Decline
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The Federal Reserve’s interest rate hike policy seems to be finally bearing fruit as inflation continues to decline. The Bureau of Labor Statistics reported on Nov 14 that inflation declined in October, raising hopes that the Federal Reserve might end its interest rate hike soon.
A decline in inflation ahead of the holiday season bodes well for the retail and consumer discretionary sectors. Thus, investing in stocks like DraftKings Inc. (DKNG - Free Report) , Electronic Arts Inc. (EA - Free Report) , Hilton Worldwide Holdings Inc. (HLT - Free Report) , Royal Caribbean Cruises Ltd. (RCL - Free Report) and Skechers U.S.A., Inc. (SKX - Free Report) would be an ideal choice.
Inflation Continues to Decline
The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased 3.2% in October on a year-over-year basis, declining from September’s rate of 3.7%. Consumer price inflation has inched up marginally over the past two months, primarily due to high energy costs, but once again dropped in October.
On a month-over-month basis, October CPI inflation remained unchanged from September and came in below economists’ expectations of a rise of 3.3%.
Core CPI, which strips out the volatile energy and food prices, rose 4% year over year in October. On a month-over-month basis, Core CPI increased 0.4%.
Signs of easing inflation — although still above the Fed’s 2% target — have raised hopes that the central bank may be done with its interest rate hikes.
Renewed optimism has seen stocks rallying in November, with Wall Street witnessing two straight weeks of positive closing as concerns of another interest rate hike have faded to a great extent. This saw the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — gaining 0.7%, 1.3% and 2.4%, respectively, last week.
Also, the latest jobs report hints at a cooling labor market. A resilient labor market posed a major concern for the Fed in its fight to bring down inflation. This has raised expectations that the Fed could soon end its monetary tightening cycle before starting rate cuts in 2024.
The positive data comes just ahead of the holiday season when people tend to spend lavishly. Easing price pressures bode well for the discretionary sector.
Our Choices
Therefore, from an investment perspective, we have identified five stocks from the consumer discretionary sector that are likely to capitalize on reduced inflationary pressure. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DraftKings Inc. is a digital sports entertainment and gaming company created to fuel the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming and digital media. DKNG is the only U.S.-based vertically integrated sports betting operator.
DraftKings’ expected earnings growth rate for the current year is 51.3%. The Zacks Consensus Estimate for the current-year earnings has improved 4.3% over the past 60 days. DKNG currently has a Zacks Rank #2.
Electronic Arts Inc., popularly known as EA, is a leading developer, marketer, publisher and distributor of digital interactive entertainment, including games, extra content and services. EA’s portfolio includes wholly owned games like Apex Legends, Battlefield, and The Sims or licensed from others, including Madden NFL, Star Wars and others.
Electronic Arts’expected earnings growth rate for the current year is 28.2%. The Zacks Consensus Estimate for the current-year earnings has improved 2.6% over the past 60 days. EA presently carries a Zacks Rank #2.
Hilton Worldwide Holdings Inc. is a hospitality company that owns, leases, manages, develops, and franchises hotels and resorts. As of Dec 31, 2022, HLT’s development pipeline comprised nearly 2,820 hotels, with nearly 416,400 rooms across 118 countries and territories — including 30 countries and territories where it currently has no running hotels.
Hilton Worldwide’s expected earnings growth rate for the current year is 23.3%. The Zacks Consensus Estimate for the current-year earnings has improved 1% over the past 60 days. HLT presently carries a Zacks Rank #2.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises’ cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which includes the budget and luxury segments.
Royal Caribbean Cruises’ expected earnings growth rate for the current year is 186.9%. The Zacks Consensus Estimate for current-year earnings has improved 9.2% over the past 60 days. RCL currently sports a Zacks Rank #1.
Skechers U.S.A., Inc. designs, develops, markets and distributes footwear for men, women and children in the United States and overseas under the SKECHERS name, as well as under several uniquely branded names. Through its distribution networks, joint venture partners in Asia and the Middle East, and wholly owned subsidiaries in Canada, Japan, throughout Europe and Latin America, SKX’s products are available in more than 170 countries and territories.
Skechers U.S.A.’s expected earnings growth rate for the current year is 44.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. SKX currently has a Zacks Rank #2.
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5 Solid Stocks to Buy as Inflation Continues to Decline
The Federal Reserve’s interest rate hike policy seems to be finally bearing fruit as inflation continues to decline. The Bureau of Labor Statistics reported on Nov 14 that inflation declined in October, raising hopes that the Federal Reserve might end its interest rate hike soon.
A decline in inflation ahead of the holiday season bodes well for the retail and consumer discretionary sectors. Thus, investing in stocks like DraftKings Inc. (DKNG - Free Report) , Electronic Arts Inc. (EA - Free Report) , Hilton Worldwide Holdings Inc. (HLT - Free Report) , Royal Caribbean Cruises Ltd. (RCL - Free Report) and Skechers U.S.A., Inc. (SKX - Free Report) would be an ideal choice.
Inflation Continues to Decline
The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased 3.2% in October on a year-over-year basis, declining from September’s rate of 3.7%. Consumer price inflation has inched up marginally over the past two months, primarily due to high energy costs, but once again dropped in October.
On a month-over-month basis, October CPI inflation remained unchanged from September and came in below economists’ expectations of a rise of 3.3%.
Core CPI, which strips out the volatile energy and food prices, rose 4% year over year in October. On a month-over-month basis, Core CPI increased 0.4%.
Signs of easing inflation — although still above the Fed’s 2% target — have raised hopes that the central bank may be done with its interest rate hikes.
Renewed optimism has seen stocks rallying in November, with Wall Street witnessing two straight weeks of positive closing as concerns of another interest rate hike have faded to a great extent. This saw the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — gaining 0.7%, 1.3% and 2.4%, respectively, last week.
Also, the latest jobs report hints at a cooling labor market. A resilient labor market posed a major concern for the Fed in its fight to bring down inflation. This has raised expectations that the Fed could soon end its monetary tightening cycle before starting rate cuts in 2024.
The positive data comes just ahead of the holiday season when people tend to spend lavishly. Easing price pressures bode well for the discretionary sector.
Our Choices
Therefore, from an investment perspective, we have identified five stocks from the consumer discretionary sector that are likely to capitalize on reduced inflationary pressure. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DraftKings Inc. is a digital sports entertainment and gaming company created to fuel the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming and digital media. DKNG is the only U.S.-based vertically integrated sports betting operator.
DraftKings’ expected earnings growth rate for the current year is 51.3%. The Zacks Consensus Estimate for the current-year earnings has improved 4.3% over the past 60 days. DKNG currently has a Zacks Rank #2.
Electronic Arts Inc., popularly known as EA, is a leading developer, marketer, publisher and distributor of digital interactive entertainment, including games, extra content and services. EA’s portfolio includes wholly owned games like Apex Legends, Battlefield, and The Sims or licensed from others, including Madden NFL, Star Wars and others.
Electronic Arts’expected earnings growth rate for the current year is 28.2%. The Zacks Consensus Estimate for the current-year earnings has improved 2.6% over the past 60 days. EA presently carries a Zacks Rank #2.
Hilton Worldwide Holdings Inc. is a hospitality company that owns, leases, manages, develops, and franchises hotels and resorts. As of Dec 31, 2022, HLT’s development pipeline comprised nearly 2,820 hotels, with nearly 416,400 rooms across 118 countries and territories — including 30 countries and territories where it currently has no running hotels.
Hilton Worldwide’s expected earnings growth rate for the current year is 23.3%. The Zacks Consensus Estimate for the current-year earnings has improved 1% over the past 60 days. HLT presently carries a Zacks Rank #2.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises’ cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which includes the budget and luxury segments.
Royal Caribbean Cruises’ expected earnings growth rate for the current year is 186.9%. The Zacks Consensus Estimate for current-year earnings has improved 9.2% over the past 60 days. RCL currently sports a Zacks Rank #1.
Skechers U.S.A., Inc. designs, develops, markets and distributes footwear for men, women and children in the United States and overseas under the SKECHERS name, as well as under several uniquely branded names. Through its distribution networks, joint venture partners in Asia and the Middle East, and wholly owned subsidiaries in Canada, Japan, throughout Europe and Latin America, SKX’s products are available in more than 170 countries and territories.
Skechers U.S.A.’s expected earnings growth rate for the current year is 44.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. SKX currently has a Zacks Rank #2.