Top Stocks to Consider After Colder PCE Data

Notably, the personal consumption expenditures (PCE) price index tracks changes in the cost of goods and services purchased by consumers in the United States through the lens of businesses.

Additionally, Core PCE is a key economic indicator that the Federal Reserve uses to gauge inflation by measuring the average change in prices of these consumer goods excluding volatile items like food and energy.

With Core PCE being the Fed’s preferred measure of inflation, that figure fell optimistically to 0.1% in May from 0.3% in April. Year-over-year, Core PCE increased by 2.6%, which, according to Yahoo Finance, is the lowest annual increase in three years.

Although this figure remains above the Fed’s preferred target of a 2% annual inflation rate, May’s Core PCE data is a positive sign for the economy and stocks.

Given that last month’s consumer price index (CPI) data also showed a cooler print, here are three stocks investors may want to consider in anticipation of a more favorable operating environment.

Image source: Yahoo Finance

Nvidia NVDA

Reducing inflation is crucial for the technology sector in terms of internal operating costs and the willingness of not only consumers but also businesses to spend on technology which in many cases may be considered non-essential despite its obvious importance.

Perhaps broader spending on AI continues to increase and keeps Nvidia stock attractive as a leader in AI chip production. Tracking Nvidia’s performance since its 10-1 stock split on June 10, NVDA is up just +2% but had already more than doubled this year prior with a very positive The trend in earnings estimate revisions suggests further upside potential. Correlating with this, the chip giant sports a Zacks Rank #1 (Strong Buy) amid what continues to be captivating top-line and bottom-line growth.

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Amazon AMZN

Outside of the tech sector, the obvious beneficiaries of a more stable inflationary environment are retail-focused companies and no one stands out more in this regard than e-commerce giant Amazon.

The market suggests so, as does Amazon stock which has climbed +10% this month and currently earns a Zacks Rank #3 (Hold) with gains already of +27% for the year.

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Bank of America BAC

Although banks may benefit from a high inflationary environment, higher loan volumes and net deposit inflows seem plausible in the business and consumer segments should the PCE reseeding and better-than-expected CPI data. continue.

Additionally, Bank of America is a bank that excels in its use of technology and can benefit from the perceived notion of lower technology costs, sporting a Zacks Rank #2 (Buy). Bank of America’s attractive price could also be of interest to investors, as its stock costs less than most other big banks at just under $40, while its forward P/E of 12.1X is comparable to that of most of his peers.

Although Bank of America has traded at steeper P/E discounts in the past, it’s worth noting that earnings estimates for FY24 and FY25 are up slightly over the past 60 days.

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BAC also has an annual dividend yield of 2.45%, lower than that of Citigroup. VS 3.44% of the four major national banks, which is higher than Wells Fargo WFC 2.44% and JPMorgan JPM 2.31%.

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Final Thought

To close out the second quarter, the recovery in core PCE is a good sign for businesses and the economy as a whole, with Nvidia, Amazon and Bank of America being three stocks to watch in the coming quarter.

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