4 Solid Stocks to Buy as Fed Keeps Interest Rate Unaltered
The Fed finally decided to leave interest rates unchanged at the conclusion of its policy meeting on Jun 14, putting an end to a string of 10 consecutive rate hikes over the past year. However, the Fed said that it may still need to raise interest rates by half a percentage point by the end of 2023 as the battle to curb multi-decade high inflation is far from over.
The Fed’s decision followed the fresh economic data that indicated a slowing inflation, although at a slower-than-expected pace. However, investors seem to be finally relieved as the central bank has finally put a pause on higher borrowing rates.
Fed Halts Interest Rate Hike
The Fed said that its decision to keep the interest rate unchanged came up after inflation showed signs of easing last month. Federal Reserve Chair Jerome Powell acknowledged that the U.S. economy and job market have demonstrated greater resilience than expected, despite the significant tightening of monetary policy implemented over the past year.
This resilience is expected to prolong the Fed’s efforts to bring down inflation, but will also allow for a more cautious approach that minimizes potential economic harm.
This came as the latest report from the Bureau of Labor Statistics, released on Jun 13, showed that the consumer price index (CPI) rose 4% year over year in May, down from April’s jump of 4.9%. The May reading was also marginally lower than analysts’ estimate of 4.1%.
With a sharp decline in May’s reading, retail inflation rates reached their lowest level since March 2021, primarily due to a drop in gasoline prices. Grocery prices have also contributed to the decline in overall inflation.
On a seasonally adjusted basis, gasoline prices dropped almost 6% in May. Additionally, the yearly rise in the cost of groceries slowed down from its peak of 13.5% to 5.8% in May.
The core Consumer Price Index (CPI), which excludes the volatile food and energy prices, fell to 5.3% year over year in May from April's reading of 5.5%, reflecting the smallest increase since the autumn of 2021.
Also, the Producer Price Index (PPI) reading, released on Jun 14, showed that producer prices fell more than expected in May. The Labor Department said the PPI fell 0.3% in May after increasing 0.2% in the prior month, declining in three of the last five months.
May’s increase in producer inflation was also the smallest in almost two-and-a-half years.
Investor sentiment will get a boost following the Fed’s decision to leave interest rates unchanged. This is because raising interest rates can impact consumer spending, raise borrowing expenses, impact economic growth, and have an effect on the stock market.
In addition, consumer discretionary stocks are expected to benefit from lower inflation and a pause in rate hikes. This is because consumers will have more disposable income to spend on non-essential items.
Our Choices
Therefore, from an investment perspective, we have identified three stocks in these sectors that are likely to capitalize on reduced inflationary pressure. 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.
OneSpaWorld Holdings Limited OSW is a provider and innovator in the fields of wellness, beauty, rejuvenation and transformation on cruise ships and on land. OSW’s service includes traditional and alternative massage, body and skincare treatment options, ayurvedic treatments, comprehensive hair and nail services, fitness, acupuncture, herbal medicine, pain management and medi-spa.
OneSpaWorld Holdings’ expected earnings growth rate for the current year is 89.3%. The Zacks Consensus Estimate for current-year earnings has improved 10.4% over the past 60 days. OSW presently carries a Zacks Rank #2.
Royal Caribbean Cruises Ltd. RCL owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises’ cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which includes the budget and luxury segments.
Royal Caribbean Cruises’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 45.8% over the past 60 days. RCL currently sports a Zacks Rank #1.
Cinemark Holdings, Inc. CNK is a leader in the motion picture exhibition industry. CNK operates 408 theatres and 4,657 screens in 38 states in the United States and internationally in 12 countries, mainly in Mexico, South and Central America.
Cinemark Holdings’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. CNK currently has a Zacks Rank #2.
Lifetime Brands, Inc. LCUT is a leading designer, marketer and distributor of kitchenware, cutlery & cutting boards, bakeware & cookware, pantry ware & spices, tabletop and bath accessories. LCUT markets its products under various trade names, including Farberware, KitchenAid, Pfaltzgraff, Cuisinart, Hoffritz, Sabatier, Nautica, DBK-Daniel Boulud Kitchen, Joseph Abboud Environments, Roshco, Baker's Advantage, Kamenstein, CasaModa, Kathy Ireland, and USE.
Lifetime Brands’ expected earnings growth rate for the current year is 93.6%. The Zacks Consensus Estimate for current-year earnings has improved 9.1% over the past 60 days. LCUT presently sports a Zacks Rank #1.
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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Cinemark Holdings Inc (CNK) : Free Stock Analysis Report
Lifetime Brands, Inc. (LCUT) : Free Stock Analysis Report
OneSpaWorld Holdings Limited (OSW) : Free Stock Analysis Report
