Yahoo Finance Powell's Hawkish Tone Rattles Wall Street: 5 Ultra-Safe Picks
Fed Chair Jerome Powell recently told the Senate Banking Committee that the central bank would have to increase interest rates more than previously anticipated to curb stubbornly high inflation. Powell categorically stated that the Fed might apply bigger interest rate hikes if future economic reports suggest strong measures to control price pressures.
The remarks followed hotter-than-expected inflation in January amid an unexpected increase in job additions for the month. January’s consumer price index increased by 0.5% month over month and notched an annual gain of 6.4%, topping analysts’ forecast of an increase of 0.4% and 6.2%, respectively, according to the Labor Department. At the same time, 517,000 new jobs were added in January, topping expectations of 187,000 job gains. The unemployment rate too fell to 3.4% in January, its lowest since 1969.
Now, with the employment report remaining astounding all around, consumer outlays are poised to improve, leading to more price pressures. So, the Fed is expected to remain aggressive in its monetary policy stance.
Following Powell’s hawkish comment, market participants, too, are expecting a 70% chance of a 50-basis point rate hike in March, per the CME FedWatch Tool. Notably, before Powell’s remarks, only 30% of Fed funds futures traders had expected a half-percentage point increase in interest rates this month.
Such a rate hike will easily push the policy rate to around 5.5% by mid-summer, and analysts expect the rates to remain at this level for the rest of the year. However, a hawkish interest rate environment does not bode well for the stock market as it impacts consumer spending habits and dampens economic growth. That is why Powell’s hawkish tone flared up volatility.
The Dow and the S&P 500 registered their worst trading day in the last two weeks on Feb 7, following Powell’s remarks on rate hikes. But investors should not stress out! They should instead place their bets on stocks that provide risk-adjusted returns or are perceived to be safe investments. Notable among them are Unitil UTL, Xcel Energy XEL, NiSource NI, Clorox CLX and Ingredion INGR.
This is because these stocks belong to the defensive sector, including consumer staples and utilities, or in other words, they are non-cyclical in nature and remain unfazed by market upheavals. Such stocks are also dividend payers, indicating a sound business model that can easily counter any market volatility. Moreover, they have a low beta (ranges from 0 to 1), making them immune to market vagaries. They have a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Unitil is a registered public utility holding company and the parent company of the Unitil System. The company has a beta of 0.5 and a Zacks Rank #2.
UTL has a dividend yield of 3%. The Zacks Consensus Estimate for its current-year earnings has moved up 1.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 7.3%.
Xcel Energy generates, purchases, transmits, distributes and sells electricity. The company has a beta of 0.41 and a Zacks Rank #2.
XEL has a dividend yield of 3%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 6.3%.
NiSource is an energy holding company that, together with its subsidiaries, provides natural gas, electricity, and other products and services in the United States. The company has a beta of 0.46 and a Zacks Rank #2.
NI has a dividend yield of 3.6%. The Zacks Consensus Estimate for its current-year earnings has moved up 1.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 6%.
Clorox is engaged in the production, marketing and sale of consumer products in the United States and international markets. The company has a beta of 0.29 and a Zacks Rank #2.
CLX has a dividend yield of 3.1%. The Zacks Consensus Estimate for its current-year earnings has moved up 2.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 3.2%.
Ingredion is an ingredients solutions provider specializing in nature-based sweeteners, starches, and nutrition ingredients. The company has a beta of 0.76 and a Zacks Rank #1.
INGR has a dividend yield of almost 2.9%. The Zacks Consensus Estimate for its current-year earnings has moved up 8.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 14.1%.
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Xcel Energy Inc. (XEL) : Free Stock Analysis Report
NiSource, Inc (NI) : Free Stock Analysis Report
The Clorox Company (CLX) : Free Stock Analysis Report
Ingredion Incorporated (INGR) : Free Stock Analysis Report
Unitil Corporation (UTL) : Free Stock Analysis Report
