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Stocks rallied on Thursday as new data showed that inflation is cooling down, leading investors to hope that the Federal Reserve will stop raising interest rates. Earnings season is set to kick off on Friday with JPMorgan Chase, Wells Fargo, and other banks reporting earnings. Forward-looking guidance from banks and other companies could set the tone for the market’s performance in the coming quarters.
On Thursday, we saw the release of the producer price index (PPI) showed that companies’ costs rose by 2.7% year over year, which is below expectations of 3%, and the largest drop in three years. The PPI data follow Wednesday’s cooler-than-expected reading on consumer prices. Investors are optimistic that the slowdown in inflation could result in rebounding profit margins, which would support earnings.
And remember we’re not talking about day trading here. I’m looking for 50-100% gains within the next 3 months, so my weekly updates are timely enough for you to act.
The Federal Reserve has been raising interest rates to lower inflation by reducing economic demand. However, the slowdown in inflation has led investors to hope that the Federal Reserve will stop raising interest rates. The possibility of a recession this year has caused concern among investors and has contributed to the stock market’s struggles.
On Wednesday, the latest CPI report showed prices rose by 5% for the 12 months ending in March, a slowdown from February’s 6%. The core CPI, which excludes volatile food and energy prices, rose by 5.6% annually. Monthly CPI showed some cooling, ticking up by 0.1% from February, compared to a previous 0.4% increase. On a monthly basis, core CPI grew 0.4%, resulting in a 5.6% annual growth rate. In February, core CPI accelerated 0.5% month over month and 5.5% year over year. The cooling of inflation has been attributed to year-over-year comparisons to a period when food and energy prices spiked amid Russia’s invasion of Ukraine.
The cooling of inflation has led to increased confidence that the Federal Reserve may soon pause its rate-hiking campaign. However, the flip side of falling inflation and interest rates is a weakening of economic demand, which the Fed highlighted in its meeting minutes released later in the day.
The VIX is trading near the $19 level, and upcoming earnings reports from companies such as Delta Air Lines, and UnitedHealth Group, as well as retail and PPI data, could influence the market’s next move. The market is expected to trade sideways for the next two to eight weeks, leading many to adopt a market-neutral stance and hedge their positions.
While the inflation narrative may not have a significant impact on equity price action, the upcoming earnings season is set to provide important insight into the market’s performance in the coming quarters. We will be keeping an eye on earnings data next week as an indicator of where the market could go. However, with these levels in mind, we have identified a sector we believe should prosper and furthermore a symbol within it to highlight.
The Consumer Staples Select Sector SPDR Fund (XLP) is a well-known exchange-traded fund (ETF) that tracks the performance of companies in the consumer staples sector of the S&P 500 Index. The fund seeks to provide investors with exposure to companies that produce and distribute consumer goods such as food, beverages, household and personal care products, tobacco, and other essential items that tend to be in demand regardless of economic conditions. XLP is one of the largest and most popular ETFs in the consumer staples sector and is widely used by investors seeking to add defensive exposure to their portfolios. Some of the top holdings in XLP include companies such as Procter & Gamble, Coca-Cola, and Walmart.
Within XLP, there is one company that is trading at an opportune level and offering a great entry price. With earnings coming up, there could be plenty of growth in consumer symbols, especially this one!
Church & Dwight Co., Inc. (CHD) is an American multinational consumer goods company known for its portfolio of household brands, including Arm & Hammer, OxiClean, Trojan condoms, First Response pregnancy tests, and more. Church & Dwight’s products are sold in various categories, such as personal care, laundry, cleaning, and oral care. The company has a strong presence in North America and international markets with a focus on innovation and sustainable practices.
CHD currently sports a grade of “B,” putting it in the top 25% of accuracy within our data universe and is trading between its 52-week range of $70-$106, currently at $89. Most importantly, our predicted data shows upward momentum for CHD with growing vector scores in a one-directional, steady fashion. See 10-day $CHD Predicted Data:
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And remember we’re not talking about day trading here. I’m looking for 50-100% gains within the next 3 months, so my weekly updates are timely enough for you to act.
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