Volatility has returned to Wall Street, escalating further on Wednesday after the Federal Reserve left interest rates unchanged. An ongoing tech selloff is already rattling markets, and concerns have now grown over how the Federal Reserve plans to tackle inflation.
Also, tensions between the United States and Iran are far from over, with oil prices time and again surging. Needless to say, overall consumer confidence is declining. Renewed fears of a slowing economy could further derail stocks.
Given this scenario, we recommend buying four defensive stocks from the utilities and consumer staples sectors, namely, Southwest Gas Holdings, Inc. SWX, Atmos Energy Corporation ATO, The Vita Coco Company, Inc. COCO and John Wiley & Sons, Inc. WLY. Each of our stock picks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fed Leaves Interest Rates Unchanged
The Federal Reserve left interest rates unchanged in its current range of 3.5-3.75% at the end of its two-day FOMC meeting on Wednesday. The decision was somewhat anticipated, but investors now fear that the Federal Reserve could fall behind in its fight to bring down inflation.
Stocks tumbled following the Fed’s decision, with the Dow ending 1,153.18 points lower to record its worst day since April 2025. The bond market also moved up, with the 10-year Treasury yield rising 7 basis points to hit 4.67%.
Inflation eased in June as oil prices fell after a temporary memorandum of understanding was signed between the United States and Iran to halt all hostilities. The consumer price index declined to 3.5% in June, more than the consensus estimate of a reading of 3.8%. The decline follows a reading of 4.2% in May.
However, hostilities resumed earlier this month, which once again pushed up oil prices. Although oil prices have eased over the past few days, inflation could once again rise owing to the ongoing tensions.
A tech selloff has already been rattling markets as investors remain worried about the sustainability of AI-related stocks, as big tech companies continue to make hefty investments in data centers.
Also, a weak labor market has been adding to the concerns, with consumer confidence falling to 90.8 in July, the Conference Board said on Tuesday. These factors could keep markets volatile for a longer period.
4 Defensive Stocks With Upside
Southwest Gas Holdings
Southwest Gas Holdings, Inc. is a regulated utility that provides natural gas services and has a wholly owned subsidiary, the Paiute Pipeline Company, through which it operates a pipeline transmission system. SWX makes deliveries of natural gas under a priority system established by state regulatory commissions, which targets higher-priority customers, primarily residential customers, while other customers who use 500 therms or less of gas per day are given greater importance.
Southwest Gas Holdings has an expected earnings growth rate of 17% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 90 days. Southwest Gas Holdings has a beta of 0.58 and a current dividend yield of 2.79%.
Atmos Energy Corporation
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.3 million customers in more than 1,400 communities across eight states from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy operates more than 73,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 13.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last 90 days. ATO has a beta of 0.60 and a current dividend yield of 2.23%.
The Vita Coco Company
The Vita Coco Company, Inc. provides a beverage platform. COCO’s brands include coconut water, Vita Coco; clean energy drink Runa; sustainable enhanced water, Ever & Ever, and protein-infused water, PWR LIFT.
The Vita Coco Company’s expected earnings growth rate for the current year is 64.7%. The Zacks Consensus Estimate for current-year earnings has improved 14% over the past 90 days. The Vita Coco Company has a beta of 0.77.
John Wiley & Sons
John Wiley & Sons, Inc. is a global provider of knowledge and knowledge-enabled services that improve outcomes in areas of research, professional practice and education. Through the Research segment, WLY provides digital and print scientific, technical, medical and scholarly journals, reference works, books, database services, and advertising.
John Wiley & Sons has an expected earnings growth rate of 14.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 90 days. John Wiley & Sons has a beta of 0.78 and a current dividend yield of 2.63%.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Vita Coco Company, Inc. (COCO): Free Stock Analysis Report
Southwest Gas Corporation (SWX): Free Stock Analysis Report
Atmos Energy Corporation (ATO): Free Stock Analysis Report
John Wiley & Sons, Inc. (WLY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).