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3 Financial Stocks to Buy Now on Core PCE Coming in High
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Key Takeaways
Core PCE inflation rose 0.22% in May, reinforcing expectations for prolonged Fed hawkishness.
Treasury yields climbed on the data, with the 10-year rising to about 3.45%, aiding financial stocks.
NNI, PGY, and UFCS show strong earnings momentum and high VGM Scores in a high-rate environment.
The May 2025 Personal Consumption Expenditures (PCE) inflation report, released at the end of June, has reinforced expectations that the Fed will remain hawkish well into the second half of the year. With core PCE inflation rising approximately 0.22% month over month and 2.68% year over year, markets have recalibrated their outlook for interest rates, pushing out anticipated cuts and increasing the likelihood of sustained higher borrowing costs.
One of the most immediate consequences has been the upward movement in Treasury yields. The benchmark 10-year yield climbed from roughly 3.35% to about 3.45% on the core PCE coming in hotter than expected. As bond markets react to the sticky inflation data, long-duration yields have been climbing, reflecting investors’ belief that rate cuts are no longer imminent. For commercial banks, the steepening yield curve may offer some relief by improving net interest margins.
In an environment where interest rates are not going to come down rapidly, stocks like Nelnet, Inc. (NNI - Free Report) , Pagaya Technologies Ltd. (PGY - Free Report) and United Fire Group, Inc. (UFCS - Free Report) become viable investment options to look into.
When interest rates are relatively high, banks and other financial institutions generally see increased profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks. Also, short-term liabilities such as deposits increase and boost net interest margins.
Bank stocks, insurance companies and other financial institutions tend to go up with continuous interest rate hikes. This is because financial services companies can earn more on the money and the credit they issue to their customers.
The sector was a strong performer in 2024, delivering solid returns. It has continued to prosper in 2025, with the S&P 500 Financials Select Sector SPDR (XLF) soaring 9.1% year to date as of June 30.
Also, financial stocks are very popular investments on their own. Most companies within the sector issue dividends and are judged on the overall strength of their financial health. It is thus prudent to add a few to one’s portfolio.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #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.
Nelnet is a loan servicing, education technology services and payment businesses company. NNI’s expected earnings growth rate for the current year is 59%. The Zacks Consensus Estimate for its current-year earnings has improved 16.8% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Pagaya Technologies provides data science and proprietary artificial intelligence-powered technology for the financial services sector. PGY’s expected earnings growth rate for the current year is 195.2%. The Zacks Consensus Estimate for its current-year earnings has improved 39.2% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
United Fire Group is a property and casualty insurance company. UFCS’ expected earnings growth rate for the next year is 8%. The Zacks Consensus Estimate for its current-year earnings has improved 3.3% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
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3 Financial Stocks to Buy Now on Core PCE Coming in High
Key Takeaways
The May 2025 Personal Consumption Expenditures (PCE) inflation report, released at the end of June, has reinforced expectations that the Fed will remain hawkish well into the second half of the year. With core PCE inflation rising approximately 0.22% month over month and 2.68% year over year, markets have recalibrated their outlook for interest rates, pushing out anticipated cuts and increasing the likelihood of sustained higher borrowing costs.
One of the most immediate consequences has been the upward movement in Treasury yields. The benchmark 10-year yield climbed from roughly 3.35% to about 3.45% on the core PCE coming in hotter than expected. As bond markets react to the sticky inflation data, long-duration yields have been climbing, reflecting investors’ belief that rate cuts are no longer imminent. For commercial banks, the steepening yield curve may offer some relief by improving net interest margins.
In an environment where interest rates are not going to come down rapidly, stocks like Nelnet, Inc. (NNI - Free Report) , Pagaya Technologies Ltd. (PGY - Free Report) and United Fire Group, Inc. (UFCS - Free Report) become viable investment options to look into.
When interest rates are relatively high, banks and other financial institutions generally see increased profitability due to increased lending rates. The gap between such lending rates is considered a long-term asset for banks. Also, short-term liabilities such as deposits increase and boost net interest margins.
Bank stocks, insurance companies and other financial institutions tend to go up with continuous interest rate hikes. This is because financial services companies can earn more on the money and the credit they issue to their customers.
The sector was a strong performer in 2024, delivering solid returns. It has continued to prosper in 2025, with the S&P 500 Financials Select Sector SPDR (XLF) soaring 9.1% year to date as of June 30.
Also, financial stocks are very popular investments on their own. Most companies within the sector issue dividends and are judged on the overall strength of their financial health. It is thus prudent to add a few to one’s portfolio.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #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.
Nelnet is a loan servicing, education technology services and payment businesses company. NNI’s expected earnings growth rate for the current year is 59%. The Zacks Consensus Estimate for its current-year earnings has improved 16.8% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
Pagaya Technologies provides data science and proprietary artificial intelligence-powered technology for the financial services sector. PGY’s expected earnings growth rate for the current year is 195.2%. The Zacks Consensus Estimate for its current-year earnings has improved 39.2% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
United Fire Group is a property and casualty insurance company. UFCS’ expected earnings growth rate for the next year is 8%. The Zacks Consensus Estimate for its current-year earnings has improved 3.3% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.