Consumers are less confident about the nation’s economy than they were a few months ago. Rising inflation and fears of an imminent global trade war owing to President Donald Trump’s proposed tariffs are denting consumers’ sentiment.
This has been taking a toll on stocks, with volatility returning to markets. Also, concerns over the Federal Reserve delaying its next rate cut till the second half of the year could keep markets volatile in the coming days.
Given the ongoing uncertainty, it would be safe to invest in utilities and consumer staple stocks, which are considered defensive. In this regard, Pinnacle West Capital Corporation PNW, NiSource Inc. NI, Atmos Energy Corporation ATO, Tyson Foods TSN and Molson Coors Beverage Company TAP from healthcare and utility are good picks. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, the stocks are from the low-beta category (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.
Consumer Sentiment Dips
Consumer sentiment plunged to a 15-month low in February. The University of Michigan Consumer Sentiment Index fell to 64.7 in February from January's revised final reading of 71.7, hitting its lowest level since November 2023. Also, the reading came in sharply lower than February’s preliminary reading of 67.8.
The five-year inflation outlook rose to 3.5%, the highest level since 1995 and higher than January’s outlook of 3.2%.
Rising inflation has been the primary reason behind sinking consumer sentiment. The consumer price index (CPI) rose 0.5% sequentially in January, following a 0.4% rise in the month earlier, the sharpest jump since August 2023. January’s rise also surpassed analysts' expectations of a rise of 0.3%.
Year over year, CPI jumped 3% in January after climbing 2.9% in December, recording its biggest annual gain since April 2024. Core CPI, which excludes volatile food and energy costs, increased 0.4% sequentially in January after a 0.2% increase in December.
Concerns Over Trump’s Tariffs, Rate Cut Delay
The Federal Reserve left interest rates unchanged in its January FOMC meeting after hinting at fewer rate cuts in 2025. The sharp spike in inflation over the past three months has raised concerns that the Federal Reserve could delay its next rate cut for a longer period.
Given the struggle to bring inflation down to its 2% target, the Federal Reserve is also likely to adopt a cautious approach toward its next rate cut. Market participants were expecting the Federal Reserve to cut interest rates in May but it is unlikely that the central bank would go for a rate cut before the second half of the year.
Also, consumers are worried about the impact of Trump’s rate cuts on the nation’s economy. Last week, Trump announced a 25% tariff on imported pharmaceuticals, automobiles and semiconductors. The week earlier, he introduced tariffs on all steel and aluminum exports.
Earlier this month, he had declared a 25% tariff on all imports from Mexico and Canada but postponed it for a month due to ongoing negotiations. Meanwhile, he has already implemented a 10% tariff on various Chinese imports, prompting Beijing to impose retaliatory tariffs. Fears of a potential global trade war are also rattling stocks.
5 Low-Beta Defensive Stocks With Upside
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 1% over the last 60 days. PNW currently carries a Zacks Rank #2. Pinnacle West Capital Corporation has a beta of 0.57 and a current dividend yield of 3.91%.
NiSource Inc
NiSource Inc., together with its subsidiaries, provides natural gas, electricity, and other products and services in the United States. NI’s operating subsidiaries deliver energy to roughly 3.7 million customers in six states: Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Indiana. As measured by the number of customers, NiSource has one of the nation’s largest natural gas distribution networks.
NiSource has an expected earnings growth rate of 9.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. NI presently has a Zacks Rank #2. NiSource has a beta of 0.54 and a current dividend yield of 2.80%.
Atmos Energy Corporation
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 5.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.72 and a current dividend yield of 2.32%.
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 22.6%. The Zacks Consensus Estimate for the current-year earnings has improved 8.3% over the past 60 days. TSN currently carries a Zacks Rank #2. Tyson Foods has a beta of 0.80 and a current dividend yield of 3.31%.
Molson Coors Beverage Company
Molson Coors Beverage Company, the global manufacturer and seller of beer and other beverage products, has an impressive diverse portfolio of owned and partner brands. TAP’s brands include global priority brands such as Blue Moon, Miller Lite, CoorsBanquet, Coors Light, Miller Genuine Draft and Staropramen, as well as regional champion brands like Carling and Molson Canadian.
Molson Coors Beverage Company’s expected earnings growth rate for the current year is 6.5%. The Zacks Consensus Estimate for current-year earnings has improved 6.4% over the past 60 days. TAP presently sports a Zacks Rank #1. Molson Coors has a beta of 0.85 and a current dividend yield of 2.92%.
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
