By Barbara Kollmeyer
China’s interest-rate cuts and some easing of the bond selloff seem to have cheered up investors — at least for now — who have been hitting the sell button over Federal Reserve rate-hike fears.
A day after Chinese President Xi Jinping warned of fallout from Fed tightening , the country’s central bank has cut benchmark lending rates for a second month (Alibaba shares /zigman2/quotes/201948298/composite BABA +1.53% are flying ). Stocks are up following another Wall Street selloff that saw the Nasdaq’s /zigman2/quotes/210598365/realtime COMP +1.07% descend into correction territory .
How much inflation fear is merited for equity investors? Keep it in check, says our call of the day from Credit Suisse strategists, who note that since the COVID-19 pandemic’s onset, “the most inflation-sensitive stocks have substantially outperformed,” and often traded at a big discount.
Jonathan Golub, chief U.S. equity strategist, and Patrick Palfrey, senior equity strategist, told clients that they expect inflation will move higher and stay there longer, due to several factors, including a strong economy and higher commodity and home prices.
“Historically, earnings and stock prices have moved directionally with inflation. As the exhibit below shows, over the past 4½ months, stock prices have risen an average of 32 bps on days when inflation expectations rise, and fall -41 bps on down inflation expectation days,” said Golub in a note.
Golub and the team have come up with exhaustive lists of companies that are most sensitive to inflation. Here’s a rundown of tech names, including Apple /zigman2/quotes/202934861/composite AAPL +0.48% and Microsoft /zigman2/quotes/207732364/composite MSFT +0.85% — least sensitive — and Nvidia /zigman2/quotes/200467500/composite NVDA -1.11% , Western Digital /zigman2/quotes/204213617/composite WDC +3.26% and Micron Tech /zigman2/quotes/205710729/composite MU +0.12% — most sensitive.
Across other sectors, they highlight other highly inflation-sensitive stocks. For example, in energy, that includes Marathon Oil /zigman2/quotes/205031829/composite MRO +3.52% , Schlumberger /zigman2/quotes/201012972/composite SLB +3.98% and Hess /zigman2/quotes/203832174/composite HES +3.58% in the energy sector, with DuPont /zigman2/quotes/203606582/composite DD +7.31% , Dow /zigman2/quotes/203121064/composite DOW +5.33% , Eastman Chemical /zigman2/quotes/200039202/composite EMN +6.20% , Freeport-McMoRan /zigman2/quotes/200215692/composite FCX +4.85% and Mosaic /zigman2/quotes/203825795/composite MOS +4.32% in materials.
American Airlines /zigman2/quotes/209207041/composite AAL +1.16% , Caterpillar /zigman2/quotes/203434128/composite CAT +8.40% , Boeing /zigman2/quotes/208579720/composite BA +2.58% , Deere /zigman2/quotes/207941296/composite DE +5.25% and Parker-Hannifin /zigman2/quotes/202924304/composite PH +4.52% are among most inflation-sensitive stocks in the industrial sector, while Bath & Body Works /zigman2/quotes/202062875/composite BBWI +4.32% , Caesars Entertainment /zigman2/quotes/205281174/composite CZR +7.68% , Norwegian Cruise Lines /zigman2/quotes/204183397/composite NCLH +1.74% , Etsy /zigman2/quotes/202790087/composite ETSY +3.68% and General Motors /zigman2/quotes/205226835/composite GM +3.82% are notables among discretionaries.
For staples, Archer Daniels /zigman2/quotes/203479136/composite ADM +2.01% , Estée Lauder /zigman2/quotes/200740220/composite EL +2.95% , Procter & Gamble /zigman2/quotes/202894679/composite PG +1.78% and Monster Beverage /zigman2/quotes/205899417/composite MNST +0.20% are among the inflation-sensitive highlights, while Anthem , Cardinal Health /zigman2/quotes/206646342/composite CAH +1.40% , McKesson /zigman2/quotes/206975466/composite MCK +0.24% , Medtronic /zigman2/quotes/206816578/composite MDT +1.22% and ResMed /zigman2/quotes/204675483/composite RMD +0.89% pop up for healthcare. And in financials, Discover /zigman2/quotes/208747867/composite DFS +3.57% , Huntington Bancshares /zigman2/quotes/209314988/composite HBAN +4.11% , Prudential /zigman2/quotes/203750923/composite PRU +3.63% , Charles Schwab /zigman2/quotes/201281754/composite SCHW +3.17% and State Street /zigman2/quotes/209758976/composite STT +2.91% are top sensitive stocks.
Read: At least 7 signs show how the stock market is breaking down
Weekly jobless claims came in higher than expected , while a Philadelphia Fed manufacturing survey rebounded to 23.2 in January . Still ahead are existing-home sales.
HSBC has cut its overweight rating on U.S. stocks, partly on rising rate expectations, saying China may be one place to hide.
Casper Sleep stock is up 11% after the mattress and sleep accessories group said shareholders have approved a buyout.
Travelers Cos . /zigman2/quotes/206313935/composite TRV +2.24% is surging on a profit beat, Signet Jewelers /zigman2/quotes/204614427/composite SIG +5.92% on higher guidance , and Baker Hughes /zigman2/quotes/205323712/composite BKR +3.39% is up modestly after results. American Airlines shares /zigman2/quotes/209207041/composite AAL +1.16% are up on a revenue beat and lower losses , while United Airlines /zigman2/quotes/205037281/composite UAL +2.30% is taking a hit from after a weaker capacity outlook for 2022 , while Alcoa stock /zigman2/quotes/200686102/composite AA +6.85% is rising after an earnings beat.
Netflix /zigman2/quotes/202353025/composite NFLX -0.66% will report results after the market close, but how important is that subscriber-growth number ?
Read: Here’s what’s coming to Netflix in February 2022 — along with a price hike