Interest Rate Roulette: 3 Stocks to Sell If the Fed Doesn't Cut Rates

Group 1: Market Overview - The Consumer Price Index fell 0.1% in June, marking the first decline in inflation in four years, which may lead the Federal Reserve to consider cutting interest rates as early as September [1] - The stock market experienced a rally due to the hopeful outlook on interest rates, particularly benefiting sectors adversely affected by previous rate increases [1] Group 2: D.R. Horton (DHI) - D.R. Horton, one of the largest homebuilders, has shown resilience despite high interest rates, outperforming the S&P 500 over the past two years [2] - The company's backlog of sales orders fell by 7% to 17,873 homes, and the value of homes for sale decreased by 5% to $7 billion [2] - D.R. Horton shares were down 10% year-to-date before the inflation report but rose to a 1% increase afterward; however, it is considered a stock to sell if the Fed does not cut rates as expected [3] Group 3: SolarEdge Technologies (SEDG) - The residential solar industry has been negatively impacted by high financing costs, leading to a significant contraction in sales, particularly in California, where the market shrank between 66% and 83% last year [4][5] - SolarEdge Technologies, the second-largest inverter manufacturer, saw its stock collapse by 71% over the last six months, although it rose 16% following the inflation report [5] - If inflation spikes again and the Fed fails to cut rates, SolarEdge is identified as a stock to sell [5] Group 4: Titan Machinery (TITN) - Small-cap stocks, including Titan Machinery, are struggling due to high interest rates, which increase borrowing costs and limit growth opportunities [6] - Titan Machinery reported that while agriculture sales rose in the first quarter, overall revenue growth was constrained by declining demand for equipment purchases due to expected lower net farm income [6] - The company's stock is down 44% in 2024, although it experienced a 5% increase after the inflation report; it is also considered a stock to sell if interest rate cuts do not materialize [7]