Image: BigstockThe post-election rally has come to a sudden halt as investors have started to reassess the economy’s health after the latest comments from the Federal Reserve.Wall Street witnessed one of the best weeks in recent times, a day after Donald Trump won the U.S. Presidential election. The Dow recorded its best post-election day rally in more than 128 years, while the S&P 500 and the Nasdaq hit individual all-time highs.The rally has continued into this week, with the Dow and the S&P 500 surpassing 44,000 and 6,000 points, respectively, for the first time on Monday. However, volatility returned following a jump in inflation and other macroeconomic factors.Given this situation, it would be wise to invest in defensive stocks in the utilities and consumer staples sectors. Such stocks include the likes of Avangrid, Inc. (AGR – Free Report), Atmos Energy Corporation (ATO – Free Report), DTE Energy Company (DTE – Free Report), The Clorox Company (CLX – Free Report), and Ingredion Incorporated (INGR – Free Report). These stocks boast either a Zacks Rank #1 (Strong Buy) rating or a #2 (Buy) rating.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.
Wall Street Rally Halts
On Thursday, the Dow fell 0.5%, while the S&P 500 and Nasdaq each shed 0.6%, retreating from their earlier highs as fresh data showed inflation rose in October. The producer price index (PPI) reading showed a month-over-month rise of 0.2% in October and 2.4% year-over-year.Core PPI, which excludes the volatile food and energy costs, rose 0.3% sequentially in October and 3.1% from the year-ago levels. The consumer price index (CPI) reading, released a day earlier, showed a 0.2% month-over-month rise in October, while it grew 2.6% year-over-year.The Federal Reserve cut interest rates by 50 basis points for the first time in more than four years in September on signs of slowing inflation. This led to a pre-election rally, which was further fueled by a 25-basis point rate cut a day after the election results were declared.However, the latest inflation data has once again raised concerns among investors, as it is still higher than the Federal Reserve’s 2% target.
Investors Reassessing the Fed’s Comments
On Thursday, Federal Reserve Chairman Jerome Powell said that the central bank need not be “in a hurry” to cut rates. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully,” Powell said.Investors, too, are worried that the Federal Reserve may not go for another rate cut in December given the underlying strength in the economy. Also, the number and pace of rate cuts in 2025 could be slower than expected.Markets are pricing in a 62.6% chance of a 25-basis-point rate cut in December, which was 82.5% just a day earlier, according to the CME FedWatch tool.
5 Low-Beta Defensive Stocks with Growth Potential
Here are 5 defensive stocks to consider.
Avangrid, Inc.
Avangrid, Inc. is the third-largest solar and wind generator in the United States, with $44 billion of assets. Avangrid operates via two primary businesses, namely Avangrid Networks and Avangrid Renewables.Avangrid has an expected earnings growth rate of 12% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the last 60 days. The stock presently carries a Zacks Rank #2 (Buy) rating. Avangrid has a beta of 0.55 and a current dividend yield of 4.91%.
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Atmos Energy Corporation
Atmos Energy Corporation, along with its subsidiaries, is engaged in regulated natural gas distribution and storage business. Atmos Energy 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. The company operates 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 4.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 60 days. The stock presently carries a Zacks Rank #2 (Buy) rating. Atmos Energy has a beta of 0.68 and a current dividend yield of 2.20%.
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DTE Energy Company
DTE Energy Company is a diversified energy company that develops and manages energy-related businesses and services nationwide. DTE Energy’s two largest regulated subsidiaries are DTE Electric Company and DTE Gas Company.DTE Energy has an expected earnings growth rate of 17.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. The stock currently has a Zacks Rank #2 (Buy) rating. DTE Energy has a beta of 0.68 and a current dividend yield of 3.44%.
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The Clorox Company
The Clorox Company is engaged in the production, marketing, and sale of consumer products in the U.S. and international markets. The company sells its products primarily through mass merchandisers, grocery stores, and other retail outlets.The Clorox Company has an expected earnings growth rate of 10.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the last 60 days. The stock currently has a Zacks Rank #2 (Buy) rating. The Clorox Company has a beta of 0.41 and a current dividend yield of 2.95%.
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Ingredion Incorporated
Ingredion Incorporated is an ingredients solutions provider specializing in nature-based sweeteners, starches, and nutrition ingredients. The company serves diverse sectors in food, beverage, brewing, pharmaceuticals, and other industries.Ingredion’s expected earnings growth rate for the current year is 12.5%. The Zacks Consensus Estimate for current-year earnings has improved 6.5% over the past 60 days. The stock currently sports a Zacks Rank #1 (Strong Buy) rating. Ingredion has a beta of 0.73 and a current dividend yield of 2.13%.
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