After a sharp decline in oil prices, investors are looking to consumer-focused stocks to improve United States household finances. Big-box stores, low-price restaurants and auto-parts companies were big beneficiaries in this fall's energy-price plunge.
These firms stand to gain the most because of the low-wage earners who spend more of each paycheck than wealthier Americans on filling up. As gas prices drop, those extra funds are likely to quickly be spent on household goods and other necessities.
Shares of big-box giant Target Corp. gained 18 percent this quarter. O'Reilly Automotive Inc. is up 25 percent, while CostCo Wholesale Corp. added 14 percent. The recent declines in gas prices should put at least an extra $40 billion in U.S. consumers' pockets this fourth quarter, according to a report from Morgan Stanley. This figure would give $42 per person each month, based on population estimates from the U.S. Census Bureau.
However, falling gas prices come at a cost. Stocks of many retailers are trading at a higher value than broad market indexes meaning further gains could be limited. Aside from higher valuations, consumers are still pinched by soft wage gains, and many have yet to find full-time work as well.
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