Historically, the Personal Consumption Expenditures (PCE) Price Index has been a reliable barometer of American consumer spending, reflecting the pulse of businesses and their monetary rhythms.

Furthermore, the Core PCE, a favorite metric of the Federal Reserve for gauging inflation sans volatile factors like food and energy, informs the nation’s economic trajectory.

Last month, Core PCE data showed a modest 0.1% rise in May juxtaposed to April’s 0.3% ascent. The year-over-year Core PCE uptick of 2.6% during the same month, albeit surpassing the Fed’s 2% inflation benchmark, marked the slowest annual progression in three years, as highlighted by Yahoo Finance.

The recent Core PCE figures, while slightly above the Fed’s target, project a promising outlook for the economy and stock market.

Given the encouraging data from the Consumer Price Index (CPI) report, here are three stocks to contemplate amidst a more favorable economic backdrop.

Image Source: Yahoo Finance

Nvidia NVDA

For the tech sector, alleviating inflationary pressures is pivotal, affecting both internal expenses and the propensity of consumers and corporations to invest in technology that, though deemed non-essential in various scenarios, plays a critical role.

The increased outlay on artificial intelligence may sustain Nvidia’s allure as a leading producer of AI chips. Since its 10-1 stock split on June 10, NVDA, presently up a modest +2%, had more than doubled its value earlier in the year, displaying a favorable trend in earnings projections that hints at further growth. Correspondingly, the chip giant boasts a Zacks Rank #1 (Strong Buy) amidst its impressive revenue and profit expansions.

Image Source: Zacks Investment Research

Amazon AMZN

Beyond tech, firms benefiting from a more stable inflation landscape, particularly in consumer-based retail, position e-commerce stalwart Amazon advantageously.

Market sentiment echoes this view, evident in Amazon’s recent 10% surge in stock value, propelling its year-to-date gains to +27% while holding a Zacks Rank #3 (Hold).

Image Source: Zacks Investment Research

Bank of America BAC

In a scenario of controlled inflation, banks stand to benefit from amplified loan demand and increased capital inflows from both business and retail channels, assuming the current trend in PCE and CPI data endures.

Among the banking cohort, Bank of America, leveraging technology competencies, is poised to capitalize on reduced technology expenditure assumptions. With a Zacks Rank #2 (Buy), Bank of America’s affordable share price, just under $40, coupled with a forward P/E ratio matching its industry peers, presents an enticing opportunity to investors.

Noteworthy is the recent uptick in earnings forecasts for FY24 and FY25, a performance metric that enhances Bank of America’s attractiveness in the market.

Image Source: Zacks Investment Research

BAC also holds a commendable 2.45% annual dividend yield, trailing Citigroup’s C 3.44%, marginally behind Wells Fargo’s WFC 2.44%, and overshadowing JPMorgan’s JPM 2.31% yield.

Image Source: Zacks Investment Research

Final Thought

Concluding Q2, the recent cooling of core PCE bodes well for businesses and the economy at large, with Nvidia, Amazon, and Bank of America emerging as promising stocks for the upcoming quarter.

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