Curious which S&P 500 stocks might benefit from the Federal Reserve's biggest rate hike in decades? Well, the market just told you.
Ten stocks in the S&P 500 including information technology Paycom Software, industrial Generac Holdings and consumer discretionary Starbucks, jumped 7.5% or more Wednesday on the day of the move, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
It's a quick reminder that big hikes in rates don't necessarily doom all the stocks in the S&P 500.
"The Fed was universally expected to boost the rate by 50 basis points, which it did," said Sam Stovall, strategist at CFRA. "Fed Chair Powell stressed that the Committee is 'acutely' aware of the hardships caused by inflation and is 'strongly committed' to price stability." Stovall thinks Fed the may hike rates in 50 basis-point increments over the next couple of meetings, and then follow up with 25 basis point increases, depending on inflation and growth data.
But don't think that's toxic for the S&P 500.
Fed Hikes Not All Bad For The S&P 500
Common knowledge posits that stocks suffer from rising rates. But reality just isn't that simple.
The S&P 500 actually rose in the six months and 12 months following a hike in short-term interest rates of 50 basis points of more since the 1970s, says Ryan Detrick of LPL Financial. The S&P 500 rose 61% of the time in the six months following a hike. And it rose 56% of the time following a hike 12 months later.
No. They're not big gains. The average S&P 500 rise in the six months following a hike was 3.7% and just 7.3% in the 12 months after. But it's a rise. That's not always the case. The S&P 500 dropped more than 12% following the hike in May 2000. And it's a similar story in 1987. That's more of the exception than the rule. "Yes, 2000 and 1987 are in there, but there are also some really solid returns as well."
Big Winners On Fed Hike
And just on cue, a number of S&P 500 stocks rallied on the news. The big winner is Paycom, which saw its shares jump more than 13.8%. That's the No. 1 rise on the day among any S&P 500 stocks. Analysts are bullish on the company, calling for 17% upside in 12 months, as there's a belief the Fed is looking to keep employment strong. The Fed Wednesday said a 75 basis point hike, which might be too aggressive and hurt employment, is off the table.
Additionally, generator maker Generac took off 11.8% Wednesday. Its shares are down more than 50% from their 52-week high on worries the economy might grind to a halt. But signs the Fed will move slowly moves the bulls back in order. Analysts think the stock could gain more than 55% in 12 months.
Lastly, Starbucks shares gained more than 9.8%. The stock has struggled all year, losing a third of its value. The company's first-quarter profit came in 1% below expectations, a big disappointment where most S&P 500 companies are topping views. But the idea is that rates won't move so high so fast, allow consumers to keep their daily Starbucks habit.
Investors have dreaded Fed day. But this time was a reminder that it's not all bad.
Top S&P 500 Stocks On Day Of May Fed Hike
| Company | Symbol | 1-day stock ch. | YTD stock ch. | Sector |
|---|---|---|---|---|
| Paycom Software | 13.8% | -21.0% | Information Technology | |
| Generac Holdings | 11.8 | -25.6 | Industrials | |
| Enphase Energy | 10.0 | 4.9 | Information Technology | |
| Starbucks | 9.8 | -30.2 | Consumer Discretionary | |
| Xylem | 9.6 | -24.7 | Industrials | |
| Albemarle | 9.3 | -7.8 | Materials | |
| Advanced Micro Devices | 9.1 | -30.9 | Information Technology | |
| Etsy | 8.8 | -50.1 | Consumer Discretionary | |
| SolarEdge Technologies | 8.3 | 1.4 | Information Technology | |
| Expeditors International of Washington | 7.9 | -17.5 | Industrials |
