Wall Street had a shaky start to 2025 after indexes retreated from their earlier highs in the final weeks of December. Concerns over a rise in inflation have raised fears of fewer rate cuts by the Federal Reserve this year.
Higher interest rates have already been taking a toll on consumer spending and impacting various sectors as higher borrowing costs continue to impact demand for goods and services.
Given the ongoing market volatility, it would be wise to invest in stocks from defensive spaces like utilities and consumer staples, such as Atmos Energy Corporation ATO, IDACORP, Inc. IDA, Pinnacle West Capital Corporation PNW, Tyson Foods TSN and United Natural Foods, Inc. UNFI.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.
Rate Cut Uncertainty Rattles Stocks
Uncertainty over the Federal Reserve’s rate cut plans has made investors jittery over the past few weeks. Concerns grew after fresh data showed that inflation rose in November. The consumer price index (CPI) rose 0.3% in November, marking its largest gain since April 2024, after rising 0.2% for four consecutive months. Year over year, CPI climbed 2.7%. Core CPI, which strips out the volatile food and energy costs, rose 0.3% sequentially in November and 3.3% from the year-ago levels.
The rise in inflation saw the post-election rally coming to a halt in the final weeks of December. Markets have stayed volatile since, with all three major indexes closing the first week of the year in negative territory.
Fears escalated further on Wednesday after the minutes of the Federal Reserve’s December policy meeting showed that almost all the committee members believe that the risks of inflation rising in the near term have grown. This raised investors’ concerns over fewer rate cuts this year.
The Federal Reserve has cut interest rates by 100 basis points since September, taking its benchmark policy rate in the range of 4.25-4.5%. However, while announcing the last rate cut in December, the Fed also said that it sees two rate cuts at the most in 2025. The ongoing concerns could make markets volatile for a longer period.
5 Low-Beta Defensive Stocks With Upside
Atmos Energy Corporation
Atmos Energy Corporation, along with its subsidiaries, is engaged in regulated natural gas distribution and storage business. ATO serves nearly 3.3 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 73,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 5.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ATO presently carries a Zacks Rank #2. Atmos Energy has a beta of 0.71 and a current dividend yield of 2.55%.
IDACORP, Inc.
IDACORP, Inc. is engaged in the transmission, distribution and sale of electricity services in southern Idaho and eastern Oregon through its primary subsidiary Idaho Power Company (Idaho Power).
IDACORP has an expected earnings growth rate of 5.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. IDA presently carries a Zacks Rank #2. IDACORP has a beta of 0.65 and a current dividend yield of 3.15%.
Pinnacle West Capital Corporation
Pinnacle West Capital Corporation provides electricity services (wholesale or retail) in the state of Arizona through its subsidiaries. PNW is involved in the generation, transmission and distribution of electricity from coal, nuclear, gas, oil and solar.
Pinnacle West Capital Corporation has an expected earnings growth rate of 16.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the last 60 days. PNW currently carries a Zacks Rank #2. Pinnacle West Capital Corporation has a beta of 0.56 and a current dividend yield of 4.30%.
Tyson Foods
Tyson Foods is the biggest U.S. chicken company that produces, distributes and markets chicken, beef, pork, as well as prepared foods. TSN’s products are marketed and sold primarily by sales staff to grocery retailers, grocery wholesalers, meat distributors, military commissaries, industrial food processing companies, chain restaurants, international export companies and domestic distributors.
Tyson Foods’expected earnings growth rate for the current year is 13.2%. The Zacks Consensus Estimate for the current-year earnings has improved 6.4% over the past 60 days. TSN currently sports a Zacks Rank #1. Tyson Foods has a beta of 0.81 and a current dividend yield of 3.60%.
United Natural Foods
United Natural Foods, Inc. is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. UNFI offers approximately 250,000 products, consisting of national, regional and private label brands, grouped into the following main product categories — grocery and general merchandise; perishables; frozen foods; wellness and personal care items; and bulk and foodservice products.
United Natural Foods’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current-year earnings has improved 18.8% over the past 60 days. UNFI currently has a Zacks Rank #1 anda beta of 0.63.
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