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4 Safe Stocks to Buy on Fading Hopes of March Rate Cut
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Wall Street was on a rally in January, with the Dow and the S&P 500 hitting record highs. However, the rally stalled on Jan 31 after the Federal Reserve said that March is too early to start rate cuts.
The Federal Reserve’s outlook following the end of its two-day FOMC meeting saw stocks taking a hit, with all three major indexes, the Dow, the S&P 500 and the Nasdaq, ending 0.8%, 1.6% and 2.2% lower, respectively, to record their worst day in 2024.
The Federal Reserve kept its benchmark policy rate steady in the range of 5.25-5.50%, which was highly expected. However, Chairman Jerome Powell said that the central bank is right now monitoring inflation data as it is still above its 2% target.
Over the past couple of months, the Federal Reserve has changed its hawkish stance to dovish and drifted from its earlier view that it would keep hiking interest rates till the 2% inflation goal is achieved.
The Federal Reserve has left interest rates steady for the fourth straight time as inflation fell sharply. However, Powell on Wednesday cleared that the Fed doesn’t plan to cut rates yet as inflation remains above the central bank’s target.
This came despite robust data indicating the underlying strength in the economy. The consumer confidence index jumped to 114.8 in January from 108 in December to hit its highest level since December 2021.
The U.S. economy grew at a pace of 3.3% in the fourth quarter of 2023. The University of Michigan’s preliminary index of consumer sentiment came up with a reading of 78.8 in January to hit a two-and-a-half-year high.
Moreover, the Fed didn’t give any clear guidance on whether it was done with its interest rate hikes. The optimism surrounding the first rate cut in March somewhat faded following the meeting.
Higher borrowing costs can impact the broader economy, and turn markets more volatile in the coming days, which can continue for a longer period.
Our Choices
Given this situation, investing in stocks from the utility sector, such as Atmos Energy Corporation (ATO - Free Report) , American Water Works Company, Inc. (AWK - Free Report) , Consolidated Edison, Inc. (ED - Free Report) and Fortis Inc. (FTS - Free Report) seems a prudent choice. These companies are considered defensive due to their non-cyclical nature and their affiliation with the utilities sector. This means that fluctuations in the market have minimal influence on these businesses.
Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta utility stocks with a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 7.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.67.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 7.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. AWK presently carries a Zacks Rank #2. American Water Works Company has a beta of 0.65.
Consolidated Edison, Inc. is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses. ED’s regulated businesses operate through its subsidiaries — Consolidated Edison Company of New York, Orange and Rockland Utilities, Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc.
Consolidated Edisonhas an expected earnings growth rate of 10.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. ED presently has a Zacks Rank #2. Consolidated Edisonhas a beta of 0.36.
Fortis Inc. is engaged in electric and gas utility business. FTS offers regulated utilities comprising electric and gas, and engages in non-regulated hydroelectric operations.
Fortis has an expected earnings growth rate of 5.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. FTS presently has a Zacks Rank #2. Fortis has a beta of 0.45.
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4 Safe Stocks to Buy on Fading Hopes of March Rate Cut
Wall Street was on a rally in January, with the Dow and the S&P 500 hitting record highs. However, the rally stalled on Jan 31 after the Federal Reserve said that March is too early to start rate cuts.
The Federal Reserve’s outlook following the end of its two-day FOMC meeting saw stocks taking a hit, with all three major indexes, the Dow, the S&P 500 and the Nasdaq, ending 0.8%, 1.6% and 2.2% lower, respectively, to record their worst day in 2024.
The Federal Reserve kept its benchmark policy rate steady in the range of 5.25-5.50%, which was highly expected. However, Chairman Jerome Powell said that the central bank is right now monitoring inflation data as it is still above its 2% target.
Over the past couple of months, the Federal Reserve has changed its hawkish stance to dovish and drifted from its earlier view that it would keep hiking interest rates till the 2% inflation goal is achieved.
The Federal Reserve has left interest rates steady for the fourth straight time as inflation fell sharply. However, Powell on Wednesday cleared that the Fed doesn’t plan to cut rates yet as inflation remains above the central bank’s target.
This came despite robust data indicating the underlying strength in the economy. The consumer confidence index jumped to 114.8 in January from 108 in December to hit its highest level since December 2021.
The U.S. economy grew at a pace of 3.3% in the fourth quarter of 2023. The University of Michigan’s preliminary index of consumer sentiment came up with a reading of 78.8 in January to hit a two-and-a-half-year high.
Moreover, the Fed didn’t give any clear guidance on whether it was done with its interest rate hikes. The optimism surrounding the first rate cut in March somewhat faded following the meeting.
Higher borrowing costs can impact the broader economy, and turn markets more volatile in the coming days, which can continue for a longer period.
Our Choices
Given this situation, investing in stocks from the utility sector, such as Atmos Energy Corporation (ATO - Free Report) , American Water Works Company, Inc. (AWK - Free Report) , Consolidated Edison, Inc. (ED - Free Report) and Fortis Inc. (FTS - Free Report) seems a prudent choice. These companies are considered defensive due to their non-cyclical nature and their affiliation with the utilities sector. This means that fluctuations in the market have minimal influence on these businesses.
Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta utility stocks with a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 7.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.67.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 7.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. AWK presently carries a Zacks Rank #2. American Water Works Company has a beta of 0.65.
Consolidated Edison, Inc. is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses. ED’s regulated businesses operate through its subsidiaries — Consolidated Edison Company of New York, Orange and Rockland Utilities, Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc.
Consolidated Edisonhas an expected earnings growth rate of 10.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. ED presently has a Zacks Rank #2. Consolidated Edisonhas a beta of 0.36.
Fortis Inc. is engaged in electric and gas utility business. FTS offers regulated utilities comprising electric and gas, and engages in non-regulated hydroelectric operations.
Fortis has an expected earnings growth rate of 5.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. FTS presently has a Zacks Rank #2. Fortis has a beta of 0.45.