The Wall Street rally has suddenly come to a halt. Tech stocks that have been primarily driving the rally since 2023 have been retreating over the past week. On Jul 24, the three major indexes ended sharply lower, with the S&P 500 and Nasdaq recording their worst day since 2022.
The S&P 500 declined 2.31% to end at 5,427.13 points, while the tech-heavy Nasdaq plummeted 3.64% to finish at 17,342.41 points. The Dow Jones Industrial Average also fell 1.25% to close at 39,853.87 points.
Investors have been rotating out of mega-cap tech stocks and placing their bets on small-cap and cyclical stocks over the past week in hopes that these stocks would benefit once the Federal Reserve starts rate cuts.
On Wednesday, tech stocks took a further beating led by a 12.3%^ decline in Tesla, Inc. TSLA after the electric carmaker reported weaker-than-expected second-quarter earnings that saw a 7% year-over-year decline in auto revenues.
Alphabet, Inc GOOGL was also responsible for Wednesday’s decline after the company reported weaker-than-expected YouTube advertising revenues.
Tech stocks have been driving the market rally this year, fueled by the ongoing enthusiasm surrounding artificial intelligence (AI), especially generative AI.
However, the rotation trade has resulted in a massive tech selloff, which has resulted in volatility returning to Wall Street.
The Federal Reserve said last month that it sees only one 25 basis point rate cut this year, which is sharply lower than the three projected in its March meeting. This means higher interest rates are going to stay for a longer period. Higher interest rates for a longer period do not bode well for growth stocks and the broader economy.
Our Choices
Given this situation, it would be wise to invest in defensive stocks. We have chosen five utilities and consumer staple stocks with a low beta (beta greater than 0 but less than 1), a high dividend yield and a favorable Zacks Rank. These are Atmos Energy Corporation ATO, NiSource Inc. NI, FirstEnergy Corp. FE, Kimberly-Clark Corporation KMB and Limoneira Company LMNR. 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.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 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. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 10.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.67 and a current dividend yield of 2.59%.
NiSource Inc., together with its subsidiaries, provides natural gas, electricity, and other products and services in the United States. NI’s operating subsidiaries deliver energy to roughly 3.7 million customers in six states — Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Indiana. NiSource has one of the nation’s largest natural gas distribution networks, as measured by the number of customers.
NiSource has an expected earnings growth rate of 7.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days. NI presently has a Zacks Rank #2. NiSource has a beta of 0.60 and a current dividend yield of 3.47%.
FirstEnergy Corp. is a diversified energy company. Through its subsidiaries and affiliates, FE engages in the transmission, distribution and generation of electricity.
FirstEnergy Corp has an expected earnings growth rate of 5.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. FE currently has a Zacks Rank #2. FirstEnergy Corp has a beta of 0.49 and a current dividend yield of 4.26%.
Kimberly-Clark Corporation is principally engaged in the manufacture and marketing of a wide range of consumer products around the world. KMB sells its products to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores, retail outlets, manufacturing, lodging, office buildings, food service and health care establishments, and high-volume public facilities.
Kimberly-Clark Corporation has an expected earnings growth rate of 7.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. KMB presently has a Zacks Rank #2. Kimberly-Clark has a beta of 0.37 and a current dividend yield of 3.59%.
Limoneira Company is an agribusiness and real estate development company. LMNR’s current operations consist of fruit production and marketing, real estate development and capital investment activities.
Limoneira Company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 46.7% over the past 60 days. LMNR presently has a Zacks Rank #2. Limoneira Company has a beta of 0.49 and a current dividend yield of 1.36%.
Zacks’ Top 3 Hydrogen Stocks
Demand for clean hydrogen energy is projected to reach $500 billion by 2030 and grow 5-FOLD by 2050. Want in? Zacks has targeted 3 diversified titans that could lead the way to becoming hydrogen powerhouses.
One has crushed the market over the past 25 years – up +2,400% to +380%.
Another already has capital commitments of $15 billion for low carbon hydrogen products through 2027 alone.
Our third pick soared to 52-week highs in Q4 2023 and has raised its dividend every year for over a decade.
See Stocks Now >>NiSource, Inc (NI) : Free Stock Analysis Report
FirstEnergy Corporation (FE) : Free Stock Analysis Report
Kimberly-Clark Corporation (KMB) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Limoneira Co (LMNR) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
