U.S. bond yields scaled record highs after inflation expectations hit the highest level in three and a half years. Such a spike in yields led to a steep decline in equity markets, while a disappointing revenue forecast by a major Asian chipmaker weighed on the sought-after technology sector. Amid all these, the working and middle class criticized the new tax law and that doesn’t sound good for the nine-year old bull market.
In the view of this, investing in big-brand stocks seems prudent. After all, they have established business models and tend to draw consumers and investor attention even when the equity market is choppy. We shouldn’t forget that such stocks are financially stable enough to cash in on a market rebound.
Bond Yields Spike, Equities Wobble
Oil hitting a three-and-a-half-year high and business houses saying that the cost of steel and several other raw materials are increasing in the United States have induced inflation fears.
Treasuries sold off as higher commodity prices diminish the value of a bond’s fixed interest payments. As treasuries came under pressure, the 10-year yield and the 30-year yield moved north. Bond yields always tend to move inversely to prices.
The benchmark 10-year Treasury note increased 4.6 basis points to 2.914% on Apr 19, its highest level since Feb 23, per Tradeweb data. The 30-year bond yield advanced 5.8 basis points to 3.106%, the maximum since Mar 21.
Rise in bond yields affected the buying appetite for stocks. Uptick in bond yields increased the opportunity cost of investing in equities and therefore equities became less alluring. All the major bourses ended in the red on Apr 19, with the blue-chip average retracing into the negative territory for the year.
Investors Cut Exposure to the Crowded Tech
The technology sector, which has hogged the limelight during the nine years of bull run, took a beating on Apr 19. And it’s all because of a disappointing forecast by an Asian chipmaker. Taiwan Semiconductor Manufacturing projected second-quarter revenues of $7.8 billion to $7.9 billion, lower than the analysts’ estimate of $8.8 billion.
The Asian chipmaker cited soft demand for high-end smartphone and being conservative on the cryptocurrency mining market for its weak guidance. The chipmaker’s partners, Apple Inc. (AAPL - Free Report) and NVIDIA Corporation (NVDA - Free Report) , saw their shares drop 2.8% and 3.1%, respectively. Shares of other chipmakers including Micron Technology, Inc. and Advanced Micro Devices, Inc. slipped 4.8% and 2.4%, individually.
Tax Cuts Don’t Favor Working Class
Trump has lowered the personal tax rate, aligning it with rates in other nations. Still, a significant number of Americans feel that the tax cuts were too generous to the wealthy compared to the middle and working class. As per the latest Gallup poll, 48% of respondents condemned the tax cuts, while only 39% were in favor of it.
Middle class constitutes the bulk of the population and with less money in their hands, they find it difficult to spend and that doesn’t bode well for economic growth. In fact, they suspect that the tax cuts for business may be permanent but for individuals, it is temporary. Republicans, in the meantime, are so demoralized by the tax overhaul policy’s unpopularity that they’re considering another round of tax cuts.
5 Hot American Brands Worth Buying Now
With the U.S. stock market going through a choppy phase, investing in big-brand companies seems judicious. These stocks will offer some respite as they boast stable cash flows. Needless to say, the value of brands is that they instantly convey information on quality, durability and consistency to consumers. These traits help such stocks counter market gyrations. And if the market pulls itself up in the near term, such companies will make the most of the positive trend as their products and services are widely accepted.
We have thus selected five of the best big-brand American stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Caterpillar Inc. (CAT - Free Report) manufactures and sells construction and mining equipment. The company was founded in 1925 and is headquartered in Peoria, IL. The company has a Zacks Rank 2. The Zacks Consensus Estimate for its current-year earnings rose 1.4% in the last 60 days. The stock’s expected growth rate for the current year is 34%, better than the Manufacturing - Construction and Mining industry’s expected gain of 15.2%.
Mastercard Incorporated (MA - Free Report) provides transaction processing and other payment-related products and services in the United States and internationally. The company was founded in 1966 and is headquartered in Purchase, New York. The company has a Zacks Rank 2. The Zacks Consensus Estimate for its current-year earnings ticked up 1% in the last 60 days. The stock’s estimated growth rate for the current year is 20.7%, compared with the Financial Transaction Services industry’s expected gain of 18.2%.
The Goldman Sachs Group, Inc. (GS - Free Report) operates as an investment banking, securities, and investment management company worldwide. The company has a Zacks Rank 1. The Zacks Consensus Estimate for its current-year earnings rose 2.5% in the last 60 days. The company, which is part of the Financial - Investment Bank industry, is expected to rally 11.8% this year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Boeing Company (BA - Free Report) designs, develops, manufactures, sales, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. The company has a Zacks Rank 2. The Zacks Consensus Estimate for its current-year earnings inched up 0.7% in the last 60 days. The stock’s expected growth rate for the current year is 16.7%, compared with the Aerospace - Defense industry’s projected gain of 15.9%. (Read more: Boeing Set to Fly High as Tariff Woes Seem Overdone).
Amazon.com, Inc. (AMZN - Free Report) engages in the retail sale of consumer products and subscriptions in North America and internationally. The company sports a Zacks Rank 1. The Zacks Consensus Estimate for its current-year earnings rose 2% in the last 90 days. The stock’s expected growth rate for the current year is 86.6%, better than the Internet - Commerce industry’s expected gain of 11.4%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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