Stocks for Market Turmoil: Consumer Staples

But now, amid banking turmoil, they’re back. Over the past five days, the S&P 500 gained 1.42%, despite the banking crisis, while the Consumer Staples Select ETF rose nearly 1%. Some favorites have done even better, particularly best-in-class operators that have reported robust trends and growing sales in the face of inflation. Over the past week,
Procter & Gamble
was up 4.11%,
Colgate-Palmolive
rose 1.21%,
Mondelez International
2.31%, and
PepsiCo
1.8%.

This isn’t surprising. Rising interest rates may blunt the appeal of these companies’ dividend yields, but that has been largely offset by investors scrambling for safety. A bonus: A number of consumer-staples stocks have demonstrated over the past year or so that they have considerable pricing power, which reduces some of inflation’s squeeze on profits. The sector’s underperformance earlier this year also trimmed their multiples, after valuations were bid up throughout 2022.

Barron’s argued earlier this year that select consumer staples were still worth investors’ attention. If Tuesday’s rally isn’t the end of the market’s bank agita—and it doesn’t look that way—the sector as a whole could find itself back in favor.

Write to Teresa Rivas at teresa.rivas@barrons.com

Last Week

Contagion

As the week began, U.S. bank failures rattled markets around the world. At home, regional banks
First Republic,

PacWest Bancorp,

Zions Bancorp,
and
Western Alliance Bancorp
took a beating, though nonbank stocks held up. The broad market, including the banks, rallied on an inflation number that finally met economists’ expectations. But bank jitters persisted as cash flowed to money-market funds and Treasuries, culminating in Thursday’s First Republic rescue. Friday brought no relief, but stocks closed mostly up on the week: the Dow industrials fell 0.15%, to 31,861.98; the S&P 500 rose 1.42%, to 3916.59; and the Nasdaq Composite soared 4.37%, to 11,630.51.

Containment

Federal regulators closed Signature Bank, which had exposure to crypto, after seizing Silicon Valley Bank, agreeing to make depositors whole at both. The eternal debate over moral hazard and regulation occurred, deposits flowed to the largest banks, and the Federal Reserve began a rethink of midsize-bank rules.
HSBC
bought the U.K. arm of
SVB
for a pound, and, after an initial failure to find a buyer for SVB, the FDIC sought bids for both banks. Later in the week, 11 big banks deposited $30 billion at First Republic to stifle panic. Speculation began about the Fed going easy on a rate rise to ensure financial stability.

Credit Suisse,
the Reprieve

Credit Suisse Group, the Swiss bank battered by financial scandals and losses, delayed its annual report, admitting to “material weakness” in identifying financial misstatements. The bank’s biggest shareholder, Saudi National Bank, said it wouldn’t provide assistance. On Wednesday, Credit Suisse got a $54 billion loan from the Swiss central bank and said it would buy back $3.2 billion in debt.

China on Offense

China brokered a deal between Saudi Arabia and Iran, carving out a role for itself as a power broker in a region the U.S. long dominated. The step is a blow to Israel, which has tried to isolate Iran. China will host a summit between Iran and the six-nation Gulf Cooperative Council later this year, and President Xi Jinping will travel to Moscow this coming week. The U.S. agreed to sell three nuclear submarines to Australia.

Bogged Down in Bakhmut

Fighting ground on in battered Bakhmut. Poland became the first Western country to provide Ukraine with jet fighters; Slovakia followed.

Annals of Deal Making

Silver Lake and Canadian pension fund CPP Investments agreed to buy SAP’s 71% stake in software analytics company
Qualtrics
for $25 billion…As expected,
Pfizer
announced its was buying cancer biotech
Seagen
for $43 billion, the biggest M&A deal of the year…The Wall Street Journal reported that Carl Icahn would nominate three directors to the board of gene-sequencer
Illumina,
whose stock has been hurt by regulators holding up a deal for cancer screener Grail…Apollo Global agreed to buy plastics distributor
Univar Solutions
for $8.1 billion…The U.S. told ByteDance it would ban TikTok unless it sold its U.S. TikTok unit.

Write to Robert Teitelman at bob.teitelman@dowjones.com