4 Solid Stocks to Bet on in a Resilient Labor Market
U.S. jobless claims unexpectedly fell to 239,000 for the week ended Jun 25, reflecting a sharp decline of 26,000 from the prior week and way below analysts’ expectations of 265,000 claims. This was also a 20-month low.
At the same time, the U.S. economy has been steadily making job additions almost every month. Needless to say, the U.S. labor market is still resilient, which has been worrying economists as the Fed’s monetary tightening policy has so far not helped much in taming multi-year high inflation.
Initial jobless claims have shown signs of increasing over the past month, giving market participants the impression that layoffs are on the rise as the Fed’s steep interest rate hikes have finally made the economy feel the pressure.
The Fed has so far raised interest rates by 500 basis points since March 2022 and finally decided to put a pause earlier this month. However, several central bank officials also said that the nation’s economy has been resilient despite 10 straight interest rate hikes.
One of the major reasons behind this has been the labor market, which has been holding its ground. The U.S. economy added 339,000 jobs in May. At the same time, the unemployment rate is still below the 4% mark, which means that people still feel their jobs are safe.
This has been giving a boost to their confidence. The Conference Board said that consumer confidence jumped to 109.7 in June from May’s reading of 102.5. June’s reading is also the highest since January 2022.
This is because people are confident about their jobs and wages. Although wage growth has slowed over the past year, it is still increasing. Average hourly wages in the United States increased 4.3% year over year in May.
These factors have been worrying the Fed and they have indicated that at least two more rate hikes of 25 basis points each would be required. This has been unsettling markets as investors are scrambling for direction, which has made markets volatile.
Given this situation, investing in defensive stocks that provide risk-adjusted returns like PPL Corporation PPL, NiSource Inc. NI, Ingredion Incorporated INGR and Lamb Weston Holdings, Inc. LW is a prudent choice. These stocks belong to the consumer staples and utility sectors, which are considered non-cyclical in nature. This means that their businesses are less affected by market fluctuations. Moreover, these stocks are known for being dividend players, indicating better quality business, which helps them bear market volatility.
Also, these are low-beta stocks, meaning their price movements are generally less volatile compared to the broader market. A beta value ranging from 0 to 1 indicates lower instability, providing investors with a perception of reduced risk when compared to the overall market. These stocks also boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PPL Corporation serves more than 3.5 million utility customers in the United States. PPL primarily generates electricity from power plants in the Northeast, Northwest and Southeast; markets wholesale or retail energy chiefly in the Northeast and Northwest ; delivers electricity to customers in Pennsylvania, Kentucky, Virginia, Tennessee; and supplies natural gas in Kentucky.
PPL Corporation has an expected earnings growth rate of 12.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. PPL presently has a Zacks Rank #2. PPL Corporation has a beta of 0.78 and a current dividend yield of 3.66%.
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. NiSource has one of the nation’s largest natural gas distribution networks as measured by a number of customers.
NiSource has an expected earnings growth rate of 8.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the last 60 days. NI presently has a Zacks Rank #2. NiSource has a beta of 0.48 and a current dividend yield of 3.69%.
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 the current year is 8.6%. The Zacks Consensus Estimate for the current-year earnings has improved 9.4% over the past 60 days. INGR carries a Zacks Rank #1. Ingredion has a beta of 0.77 and a current dividend yield of 2.72%.
Lamb Weston Holdings, Inc. is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries, and provides a range of appetizers. LW, along with its joint venture allies, is the top frozen potato products supplier in North America, while it also operates internationally, with a robust and growing presence in emerging markets.
Lamb Weston’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current-year earnings has improved 0.2% over the past 60 days. LW currently has a Zacks Rank #2. Lamb Weston has a beta of 0.54 and a current dividend yield of 0.99%.
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PPL Corporation (PPL) : Free Stock Analysis Report
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Ingredion Incorporated (INGR) : Free Stock Analysis Report
Lamb Weston (LW) : Free Stock Analysis Report
