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Inflation Decline Raises September Rate Cut Hopes: 4 Winners
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Inflation has been showing strong signs of cooling over the past couple of months, bolstering hopes of a rate cut soon. The Commerce Department reported on Jul 26 that the personal consumption expenditure (PCE) price index, the Federal Reserve’s key inflation gauge, increased just 0.1% month over month in June, which came in line with economists’ expectations.
Year over year, the PCE index increased 2.5% in June after increasing 2.6% in the prior month and came in line with the consensus estimate.
Core PCE inflation, which excludes volatile food and energy prices, increased 0.2% sequentially in June and 2.6% from the year-ago level.
The Federal Reserve uses the PCE measure as the primary baseline to assess inflation. Although inflation remains above the Fed’s 2% target, it has been declining steadily after increasing in the first quarter.
Also, personal income and spending increased, which indicates that the economy is still on solid ground. Personal income increased 0.2% month over month in June, while spending rose 0.3%.
Easing inflation coupled with a cooling labor market has raised hopes of a September rate cut.
The Federal Reserve increased interest rates to a 23-year high in the range of 5.25-5.5% in its bid to combat sky-high inflation. However, the central bank has kept rates steady over the past year.
The PCE data came just ahead of the Federal Reserve’s July FOMC meeting. The Fed had earlier said that it sees only a single 25-basis point rate cut this year. However, positive economic data released over the past week has raised hopes of more than one rate cut this year, which bodes well for the broader economy.
Our Choices
Given this scenario, we have narrowed our search to four consumer discretionary stocks, namely YETI Holdings, Inc. (YETI - Free Report) , Virco Mfg. Corporation (VIRC - Free Report) , Netflix, Inc. (NFLX - Free Report) and Reservoir Media, Inc. (RSVR - Free Report) .
YETI Holdings designs, markets and distributes products for the outdoor and recreation market under the YETI brand, primarily in the United States. The company's products are designed for outdoor activities, including hunting, fishing, camping, barbecue, and farm and ranch activities, among others.
YETI Holdings’ expected earnings growth rate for the current year is 15.6%. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the past 60 days. YETI currently carries a Zacks Rank #2.
Virco Mfg. designs, produces, and distributes quality furniture for the contract and education markets worldwide. Examples of facilities served by VIRC include public and private schools, colleges and universities, convention centers, federal and state institutions, churches and other businesses.
Virco Mfg.’s expected earnings growth rate for the current year is 38.8%. The Zacks Consensus Estimate for current-year earnings improved 16.3% over the past 60 days. VIRC currently carries a Zacks Rank #2.
Netflix is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping it sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 58.6%. The Zacks Consensus Estimate for current-year earnings has improved 4.2% over the past 60 days. Netflix currently carries a Zacks Rank #2.
Reservoir Media is a music company. RSVR principally operates in Los Angeles, Nashville, Toronto, London and Abu Dhabi.
Reservoir Media’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 14.3% over the past 60 days. RSVR currently carries a Zacks Rank #2.
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Inflation Decline Raises September Rate Cut Hopes: 4 Winners
Inflation has been showing strong signs of cooling over the past couple of months, bolstering hopes of a rate cut soon. The Commerce Department reported on Jul 26 that the personal consumption expenditure (PCE) price index, the Federal Reserve’s key inflation gauge, increased just 0.1% month over month in June, which came in line with economists’ expectations.
Year over year, the PCE index increased 2.5% in June after increasing 2.6% in the prior month and came in line with the consensus estimate.
Core PCE inflation, which excludes volatile food and energy prices, increased 0.2% sequentially in June and 2.6% from the year-ago level.
The Federal Reserve uses the PCE measure as the primary baseline to assess inflation. Although inflation remains above the Fed’s 2% target, it has been declining steadily after increasing in the first quarter.
Also, personal income and spending increased, which indicates that the economy is still on solid ground. Personal income increased 0.2% month over month in June, while spending rose 0.3%.
Easing inflation coupled with a cooling labor market has raised hopes of a September rate cut.
The Federal Reserve increased interest rates to a 23-year high in the range of 5.25-5.5% in its bid to combat sky-high inflation. However, the central bank has kept rates steady over the past year.
The PCE data came just ahead of the Federal Reserve’s July FOMC meeting. The Fed had earlier said that it sees only a single 25-basis point rate cut this year. However, positive economic data released over the past week has raised hopes of more than one rate cut this year, which bodes well for the broader economy.
Our Choices
Given this scenario, we have narrowed our search to four consumer discretionary stocks, namely YETI Holdings, Inc. (YETI - Free Report) , Virco Mfg. Corporation (VIRC - Free Report) , Netflix, Inc. (NFLX - Free Report) and Reservoir Media, Inc. (RSVR - Free Report) .
These stocks have seen positive earnings estimate revisions in the past 60 days. Each of the stocks has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
YETI Holdings designs, markets and distributes products for the outdoor and recreation market under the YETI brand, primarily in the United States. The company's products are designed for outdoor activities, including hunting, fishing, camping, barbecue, and farm and ranch activities, among others.
YETI Holdings’ expected earnings growth rate for the current year is 15.6%. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the past 60 days. YETI currently carries a Zacks Rank #2.
Virco Mfg. designs, produces, and distributes quality furniture for the contract and education markets worldwide. Examples of facilities served by VIRC include public and private schools, colleges and universities, convention centers, federal and state institutions, churches and other businesses.
Virco Mfg.’s expected earnings growth rate for the current year is 38.8%. The Zacks Consensus Estimate for current-year earnings improved 16.3% over the past 60 days. VIRC currently carries a Zacks Rank #2.
Netflix is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping it sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 58.6%. The Zacks Consensus Estimate for current-year earnings has improved 4.2% over the past 60 days. Netflix currently carries a Zacks Rank #2.
Reservoir Media is a music company. RSVR principally operates in Los Angeles, Nashville, Toronto, London and Abu Dhabi.
Reservoir Media’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 14.3% over the past 60 days. RSVR currently carries a Zacks Rank #2.