CPI reports: These stocks could benefit from decreased inflation

Several stocks could profit from the lower inflation trend.

On a monthly basis, the consumer price index increased by just 0.1% in March. Economists predicted a 0.2% gain, according to a survey by Dow Jones. The increase in core inflation was about in line with predictions. The prediction excludes volatile food and energy prices.

On the strength of the news, Treasury yields decreased. To 3.739%, the 2-year Treasury rate decreased by 6 basis points. The yields on the one-year and three-year bonds decreased as well. Prices and yields follow opposite trends.

In light of this context, CNBC Pro searched for Nasdaq-100 stocks. The performance of the iShares 1-3 Year Treasury Bond ETF (SHY) monitors changes in 1-, 2-, and 3-year Treasury notes.

Illumina, a biotech company, had the highest connection, with a value of 0.35. In other words, a 1% increase in the SHY equals a 0.35 percent increase in the stock. This year, shares of Illumina have increased by more than 13%. The stock’s average correlation dating back to 2015 is undoubtedly fairly flat.

Stocks facing a large increase as the inflation rates keep decreasing

American Electric Power, which has a correlation coefficient of 0.26, is also included on the list. The utility stock has increased 15% over the last six months, despite being flat for the year. The correlation for American Electric going back to 2015 was 0.19.

Another biotech stock on the list, Seagen, also made it with a rolling correlation of 0.28. In 2023, the stock has increased by an astounding 60%. The business revealed earlier this year that Pfizer would buy it for $43 billion.

Starting the year, there was a strong correlation between the Nasdaq-100 and the SHY, with a value far above 0.4. That correlation, however, has decreased recently to about 0.2 due to the uncertainty surrounding the Federal Reserve’s future course on inflation as it attempts to bring price pressures back down to its 2% objective.

Additionally, correlations don’t always hold, and individual stock-specific drivers may have a stronger impact on how stocks trade. Even so, these equities might see some gains if inflation does lower and short-term interest rates drop.