Top Stocks to Consider After Cooler PCE Data — TradingView News

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 inflation measure, this figure optimistically eased to a 0.1% increase in May from a 0.3% increase in April. Year over year, Core PCE rose 2.6%, which Yahoo Finance said was the slowest annual gain in three years.

While that figure is still 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.

It is possible that broader spending on artificial intelligence will continue to increase and keep Nvidia stock attractive as a leader in AI chip production. Tracking Nvidia’s performance since its 10-for-1 stock split on June 10, NVDA is up just +2% but had already more than doubled this year prior with a very positive trend in earnings estimate revisions suggesting further upside. In line with this, the chip giant sports a Zacks Rank #1 (Strong Buy) amid continued compelling growth in its operating results and earnings.

Amazon AMZN

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

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

Bank of America BAC

While banks may benefit from a high inflationary environment, higher loan volumes and net deposit inflows appear plausible in both the commercial and consumer segments if PCE reseeding and better-than-expected CPI data were to 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, which carries a Zacks Rank #2 (Buy). Bank of America’s attractive pricing could also appeal to investors, as its stock costs less than most other large banks, at just under $40, while its forward P/E of 12.1X is comparable to most of its peers.

Although Bank of America has traded at steeper P/E discounts in the past, it is worth noting that FY24 and FY25 earnings estimates have trended slightly higher over the past 60 days.

BAC also has an annual dividend yield of 2.45%, which is behind only Citigroup’s C, at 3.44%, among the big four national banks, ahead of Wells Fargo’s WFC, at 2.44%, and JPMorgan’s JPM, at 2.31%.

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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