Wall Street analysts argue these ‘safe haven’ consumer stocks are outperforming – even as spending slows

Inflation is hitting consumers’ wallets and the economy seems to be slowing down.

With the consumer accounting for 68% of all economic activity in the first quarter, this is a key indicator to watch.

What does all this mean for consumer-related businesses and will they weather a recession? Wall Street analysts choose consumer stocks they believe are resilient even if the economy slows. Pro subscribers can learn more here.

—Weizhen Tan

Chinese factory activity growth slowed in July, private survey finds

Chinese factory activity increased in July, but at a slower pace than in June, according to the latest Caixin/Markit Manufacturing Purchasing Managers Index.

Private survey printing came in at 50.4, down from 51.7 in June.

PMI readings are sequential and represent the expansion or contraction of the previous month. A number above 50 represents growth.

Over the weekend, official data from the National Bureau of Statistics showed factory activity declined, with the PMI reading at 49.

—Abigail Ng

Earnings Season Numbers

So far, 56% of S&P 500 companies have reported results for the second quarter of 2022. Of those, 73% have reported EPS results above analyst estimates, according to FactSet.

That means blended earnings growth so far — including companies that released reports and estimates for those that released reports later — is 6% for the second quarter. That’s higher than the mixed earnings growth seen last week.

Still, if the actual earnings growth rate is 6% at the end of the season, it will mark the lowest earnings growth rate for S&P 500 companies since the fourth quarter of 2022.

Revenues, on the other hand, outperform profits. The compounded revenue growth rate so far is 12.3%, up from last week and last quarter. If the real revenue growth rate is 12.3%, it will be the sixth consecutive quarter of year-over-year revenue growth of more than 10% for the index.

Carmen Reinicke

End of July statistics

All three major indices ended the day higher on Friday, capping a strong month of trading in July. Here are some other key stats on how stocks have traded over the past month.

  • The Nasdaq composite closed over 22% from 52-week highs, while the S&P 500 and Dow closed over 14% and 11% from their 52-week highs, respectively.
  • The Dow Jones gained 6.73% in July, its best month since November 2020. It was also the S&P 500’s best week since November 2020. It gained 9.11% in July.
  • The Nasdaq composite gained 12.35% in July and snapped a three-month losing streak. It was the best month for the index since April 2020.
  • Only the Health Care, Consumer Staples and Utilities sectors closed within 10% of 52-week highs. However, all 11 sectors were positive in July.
  • US Treasury yields were lower on Friday, narrowing spreads.

Carmen Reinicke

Last week on the stock market

Investors are still watching for signs that the US is in recession and inflation is slowing. Last week, the Federal Reserve raised its benchmark interest rate an additional three-quarters of a percentage point to head off high inflation.

The first reading of second-quarter GDP on Thursday was negative, potentially indicating a technical recession. On Friday, June personal consumption spending hit its highest level since January 1982. The report is a key measure of inflation.

Strong earnings reports from Amazon and Apple boosted each company’s stock and lifted indexes to end July. Energy companies such as Chevron and Exxon Mobil also rose on better than expected reports, ending Friday higher. However, not all revenues were rosy. Meta Platforms and Intel both posted disappointing results, dragging stocks lower.

Carmen Reinicke

Stock futures open lower

Equity futures opened a little lower to start trading on Sunday evening.
Dow and S&P 500 futures fell 0.2%. Nasdaq futures were down about 0.3%.

John Melloy

What awaits us this week

Equities enter the generally volatile month of August with a tailwind. There are dozens of earnings reports in the week ahead, with more than 20% of S&P 500 companies. There is also key data, with Friday’s July jobs report being the most important.

Major economic reports could become important catalysts now that the Federal Reserve has indicated that it will rely on the data to make its decision on how much to raise interest rates in September. Fed Chairman Jerome Powell said the labor market remained strong and investors worried about an economic slowdown would be watching closely for the strength of job creation. 250,000 jobs are expected. According to CFRA, since 1995, the S&P 500 has recorded an average decline of 0.5% in August. Strategists say earnings could remain a positive force.

“A lot of this is better than feared. If this process continues, it will probably help the market to go higher. The market seems to be sitting on this notion that we valued at Armageddon and so far, it was not imposed on us,” one strategist said.

Patti Domm