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Volatility has returned to Wall Street, disrupting the solid rebound that followed a massive selloff in early August. The recent stock market volatility is being triggered by fears over the economy’s health, rekindled by disappointing jobs data.

Also, September, over the years, has proven to be one of the worst months for stocks. Given this situation, it may be safe to invest in utility stocks like American Water Works Company, Inc. (AWK - Free Report), American States Water Company (AWR - Free Report), Evergy, Inc. (EVRG - Free Report), and OGE Energy Corp. (OGE - Free Report), which are defensive in nature.

Weak Jobs Data Impacted Markets

A weak jobs data report, which was released on Thursday, renewed concerns of a weakening economy. Employers hired at a slow pace, with private payrolls adding just 99,000 jobs in August, its smallest increase since January 2021 and sharply below the consensus estimate of a gain of 145,000.

Following the release of the report, stocks tumbled. The Dow declined 0.5%, while the S&P 500 shed 0.3%. The S&P 500 edged down for the third straight session.

A resilient labor market was the Federal Reserve’s biggest challenge in its fight to control inflation. However, it has started showing signs of cooling over the past few months. However, job additions to the economy have slowed more than expected now, igniting fears that the nation’s economy is weakening.

Other Factors Taking a Toll on Stocks

Also, the manufacturing sector has been struggling over the past several months as higher borrowing costs have not only pushed up raw material and other costs, but have also been drying up demand.

The Institute for Supply Management (ISM) said that its manufacturing PMI rose to just 47.2 in August from 46.8 in July. The manufacturing sector accounts for 10.3% of the economy. However, any PMI reading below 50 indicates a contraction in the economy.

Inflation has declined sharply over the past few months, but it is still above the Fed’s 2% target. The Fed has hinted at starting its easing cycle soon, and it is expected to go ahead with its first rate cut this month.

Market participants are pricing in a 25-basis-point rate cut. However, the Federal Reserve hasn’t yet said anything on how big the rate cut will be and how many rate cuts it plans for this year.

Also, Wall Street is likely to encounter seasonal challenges, as September has traditionally been the most challenging month for the S&P 500 over the past 10 years. This trend could prolong market volatility.

Utility Stocks With Growth Potential

Given this situation, it may be wise to invest in defensive stocks like utilities. We have chosen four such stocks that are potentially safe bets during times of market volatility.

Also, these belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high-dividend yield and a favorable Zacks Rank.

American Water Works Company

American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states, and it has an employee total of around 6,500. The company often acquires small water service providers to expand its customer base.

American Water Works Company has an expected earnings growth rate of 7.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. American Water Works has a beta of 0.69 and a current dividend yield of 2.12%. Currently, the stock carries a Zacks Rank #2 (Buy).

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American States Water Company

American States Water Company, along with its subsidiaries, provides fresh water, wastewater services, and electricity to its customers in the United States. American States Water Company principally works through its two major subsidiaries — Golden State Water Company and American States Utility Services.

American States Water Company has an expected earnings growth rate of 6.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 60 days. The stock presently carries a Zacks Rank #2 (Buy). American States Water Company has a beta of 0.49 and a current dividend yield of 2.29%.

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Evergy, Inc.

Evergy, Inc., through its operating subsidiaries Kansas City Power & Light Company, Evergy Metro, Inc., and Evergy Missouri West, Inc., provides clean, safe and reliable energy to more than 1.7 million customers in Kansas and Missouri. Evergy, Inc. has 15,600 megawatts of owned generating capacity and renewable power purchase agreements.

Evergy has an expected earnings growth rate of 8.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. The stock currently carries a Zacks Rank #2 (Buy). Evergy has a beta of 0.62 and a current dividend yield of 4.27%.

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OGE Energy Corp.

OGE Energy Corp. provides electricity in Oklahoma and western Arkansas. OGE Energy Corp. is the parent company of Oklahoma Gas and Electric Company, which is the largest electric utility in Oklahoma, and its franchised service territory is the Fort Smith, AR area.

OGE Energy Corp has an expected earnings growth rate of 3.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days. The stock presently has a Zacks Rank #2 (Buy). OGE Energy Corp has a beta of 0.74 and a current dividend yield of 4.27%.

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