The S&P 500 posted a stunning rally in the first three months of 2024, relying on AI optimism and hopes that the Federal Reserve will cut interest rates in the second half of this year.
However, the broader index has experienced a topsy-turvy ride so far this month. This is due to a warmer-than-expected rise in consumer prices and an increase in wholesale prices, which have weakened the chances of any tariffs in the near term.
Although the prices of essential goods and services have fallen significantly from their peak of 9.1% in June 2022, they remain well above the mark of the coronavirus pandemic.
The Labor Department noted that the consumer price index increased 0.4% month over month in March and rose 3.5% from a year ago, the largest gain in six months. Analysts projected a gain of 0.3% sequentially and an increase of 3.4% year over year.
The increase in gasoline and shelter costs largely contributed to the rise in consumer prices. Wholesale prices also heated up last month. In the 12 months ending in March, the producer price index increased 2.1%, up from February’s gain of 1.6%. An increase in service prices has largely driven up wholesale prices, the Labor Department added.
Needless to say, an increase in price pressures will force the Fed to hold steady rates, which are already at record highs. Higher rates constrain consumer spending, raise borrowing costs, derail economic growth and lead to stock market volatility.
The S&P 500, therefore, has retreated more than 1% so far in April despite ending the last trading session in the green. In fact, the S&P 500 was very close to its 50-day moving average (DMA) on April 11th.
Trading at its session low Thursday, the S&P 500 was within 33 points of its 50 DMA. It was the closest the index has reached to its 50 DMA since Nov. 2, according to FactSet data.
Lest we forget that if the index fell below the 50 DMA, it was destined to decline further. Hence, in such a precarious scenario, savvy investors should play it safe and invest in stocks such as Iron Mountain Incorporated IRM, Organon & Co. OGN and International Business Machines Corporation IBM.
These stocks carry a low beta (range from 0 to 1), making them immune to market upheavals. They also provide dividends, an indication that they have a solid business model that helps them withstand market vagaries. They have a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Iron Mountain provides records and information management services. The company has a beta of 0.94 and a Zacks Rank #1.
IRM has a dividend yield of 3.4% and a 5-year dividend yield of 6.2%. The Zacks Consensus Estimate for its current year earnings has risen 4.5% over the past 60 days. The company’s expected revenue growth for the current year is 7.3%.
an organ is a healthcare company. The company has a beta of 0.83 and a Zacks Rank #1.
OGN has a dividend yield of 6.2% and a 5-year dividend yield of 4.5%. The Zacks Consensus Estimate for its current year earnings has risen nearly 1% over the past 60 days. The company’s expected revenue growth for the current year is 2.4%.
International Business Machines has evolved as a provider of cloud and data platforms. The company has a beta of 0.7 and a Zacks Rank #2.
IBM has a dividend yield of 3.6% and a 5-year dividend yield of 4.9%. The Zacks Consensus Estimate for its current year earnings has risen 0.3% over the past 60 days. The company’s expected revenue growth for the current year is 4.7%.
Shares of Iron Mountain, Organon and International Business Machines have respectively gained 9.5%, 26.8% and 13.7% year to date.
Image source: Zacks Investment Research
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International Business Machines Corporation (IBM): Free Analysis Report
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