Advertisement
New Zealand markets open in 9 hours 24 minutes
  • NZX 50

    12,309.91
    -15.69 (-0.13%)
     
  • NZD/USD

    0.5990
    -0.0021 (-0.35%)
     
  • ALL ORDS

    8,166.40
    -42.80 (-0.52%)
     
  • OIL

    79.62
    -0.51 (-0.64%)
     
  • GOLD

    2,399.50
    +0.40 (+0.02%)
     

5 Safe Stocks to Buy as Uncertainty Over Rate Cuts Continue

Inflation eased marginally in April but the crisis is far from over as the Federal Reserve is in a wait-and-watch mode as far as the planned rate cuts are concerned. This has led to volatility returning to Wall Street.

Last week, all three major indexes snapped their winning streak. The Dow, the S&P 500 and Nasdaq. The Nasdaq and the S&P 500’s five-week rally came to a halt, with the indexes ending the week 0.5% and 1.1% lower, respectively. The Dow finished 0.9% lower to record its second straight week of losses.

In April, the consumer price index (CPI) rose by 3.4% from the previous year and increased by 0.3% from the previous month, slightly below the expected 0.4% rise.

The Federal Reserve's preferred inflation gauge, the personal consumption expenditure (PCE) index, saw a 0.3% monthly increase in April, in line with expectations and unchanged from March.

ADVERTISEMENT

Core PCE, which excludes volatile food and energy costs, rose by 0.2% in April, which was lower than March's 0.3% increase and the expected repeat increase.

Year over year, PCE increased by 2.7% in April, consistent with March's growth and analysts’ expectations. Core PCE rose by 2.8% year over year, matching March's jump and in line with expectations.

However, inflation remains sharply above the Federal Reserve’s 2% target, which has raised uncertainty over future rate cuts.

The Fed had indicated multiple rate cuts in 2024 but that isn’t likely to happen. The Federal Reserve is likely to keep interest rates unaltered in the range of 5.25-5.50% but market participants believe the first rate cut isn’t likely to happen before September, followed by another cut by December.

Moreover, manufacturing activity continues to slow. The Institute for Supply Management’s (ISM) manufacturing PMI fell to 48.7% in May, recording its 18th decline in the past 19 months.

Our Choices

Given this situation, it would be wise to invest in defensive stocks like utilities and consumer staples such as Atmos Energy Corporation ATO, California Water Service Group CWT, Portland General Electric Company POR, PepsiCo, Inc. PEP and Kimberly-Clark Corporation KMB. 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.

Also, these 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 stocks with a high-dividend yield and a favorable Zacks Rank.

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 9.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.67 and a current dividend yield of 2.78%.

California Water Service Group is one of the largest investor-owned water utilities in the United States. CWT has six subsidiaries — California Water Service, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, CWS Utility Services and HWS Utility Services.

California Water Service Group has an expected earnings growth rate of 246.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 40% over the last 60 days. CWT currently carries a Zacks Rank #1. California Water Service Group has a beta of 0.48 and a current dividend yield of 2.24%.

Portland General Electric Company is a vertically integrated electric utility that serves residential, commercial and industrial customers in Oregon. POR has more than a century of experience in power delivery. Portland General Electric Company generates power from a diverse mix of resources, including hydropower, coal and natural gas.

Portland General Electric Company has an expected earnings growth rate of 29.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. POR presently carries a Zacks Rank #2. Portland General Electric Company has a beta of 0.58 and a current dividend yield of 4.30%.

PepsiCo, Inc. is one of the leading global food and beverage companies. PEP’s complementary brands/businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. PepsiCo serves customers in more than 200 countries and territories.

PepsiCo has an expected earnings growth rate of 7.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. PEP currently has a Zacks Rank #2. PepsiCo has a beta of 0.52 and a current dividend yield of 2.91%.

Kimberly-Clark Corporation is principally engaged in the manufacture and marketing of a wide range of consumer products around the world. KMB sells its products to supermarkets; mass merchandisers; drugstores; warehouse clubs; variety and department stores; retail outlets; manufacturing, lodging, office building, food service, and health care establishments; and high-volume public facilities.

Kimberly-Clark Corporation has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the last 60 days. KMB presently has a Zacks Rank #2. Kimberly-Clark has a beta of 0.38 and a current dividend yield of 3.55%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Kimberly-Clark Corporation (KMB) : Free Stock Analysis Report

PepsiCo, Inc. (PEP) : Free Stock Analysis Report

Portland General Electric Company (POR) : Free Stock Analysis Report

Atmos Energy Corporation (ATO) : Free Stock Analysis Report

California Water Service Group (CWT) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research