The Federal Reserve slashed interest rates by 25 basis points on Wednesday at the end of its December Federal Open Market Committee meeting. The central bank’s move was highly anticipated. However, all three major indexes tanked following the announcement.
More than cheering the latest rate cut, concerns grew surrounding the hawkish stance from Federal Reserve Chairman Jerome Powell, who hinted at fewer rate cuts in 2025 due to stubbornly high inflation. Wall Street has been volatile over the past week and fresh concerns over the nation’s economy may keep markets volatile for a longer period.
Given this situation, it would be wise to invest in stocks from a defensive space like consumer staples such as Tyson Foods TSN, United Natural Foods, Inc.UNFI, Ingredion Incorporated INGR and The Clorox Company CLX.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.
Markets Tumble After Fed Announcement
The Federal Reserve’s latest rate cut takes its benchmark policy rate in the range of 4.25-4.5%, back to the December 2022 level when interest rates were being hiked. Concerns have been growing over the past two weeks over the Federal Reserve’s move with future rate cuts after fresh data showed inflation rose in November. On Wednesday, the Federal Reserve’s disappointing rate cut outlook took a further toll on stocks.
The Dow shed 1,123 points to record its worst losing streak since its last 11-day slump in 1974. This is only the second time the Dow has shed more than 1,000 points in a single day and recorded its worst day since August. The S&P 500 and the Nasdaq slid 3% and 3.6%, respectively.
Wednesday’s decline came after Powell said that caution should be maintained as inflation remains stubbornly high” and indicated that the Fed would likely lower interest rates only twice in 2025, based on the "dot plot" showing individual members' future rate projections. These two cuts now reduce the committee's previous expectations by half, as reflected in the September update of the dot plot.
Volatility Could Continue
The post-election rally came to a halt earlier this month on these concerns. Indexes have retreated sharply from their previous all-time highs attained at the beginning of December. Maintaining their hawkish stance, Fed officials also hinted at two more rate cuts in 2026, followed by another in 2027.
Inflation declined sharply over the past year but has been moving sideways over the past few months, a point Powell also mentioned in his speech. The Commerce Department reported last week that the consumer price index (CPI) climbed 0.3% in November, marking its largest gain since April, after rising 0.2% for four consecutive months. Year over year, CPI rose 2.7%. Core CPI, which excludes the volatile food and energy prices, jumped 0.3% sequentially in November and 3.3% from the year-ago levels.
Although the Fed’s moves are based on data, investors remain concerned about higher borrowing rates. This could keep markets volatile for a longer period.
4 Low-Beta Consumer Staples Stocks With Upside
Tyson Foods
Tyson Foods is the biggest U.S. chicken company and 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 next year is 17.4%. The Zacks Consensus Estimate for the current-year earnings has improved 7.7% over the past 60 days. TSN currently has a Zacks Rank #1. Tyson Foods has a beta of 0.79 and a current dividend yield of 3.37%.
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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 next year is 54.2%. The Zacks Consensus Estimate for the current-year earnings has improved 12.5% over the past 60 days. UNFI currently has a Zacks Rank #1. United Natural Foods has a beta of 0.64.
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Ingredion Incorporated
Ingredion Incorporated is an ingredients solutions provider specializing in nature-based sweeteners, starches, and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.
Ingredion’s expected earnings growth rate for next year is 5.5%. The Zacks Consensus Estimate for current-year earnings has improved 6.4% over the past 60 days. INGR currently sports a Zacks Rank #1. Ingredionhas a beta of 0.74 and a current dividend yield of 2.25%.
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The Clorox Company
The Clorox Company is engaged in the production, marketing and sales of consumer products in the United States and international markets. CLX sells its products primarily through mass merchandisers, grocery stores and other retail outlets.
The Clorox Company has an expected earnings growth rate of 4.7% for next year. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the last 60 days. CLX currently has a Zacks Rank #2. The Clorox Company has a beta of 0.42 and a current dividend yield of 2.99%.
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