Tech cools down, defensive sectors rise! During US earnings season, capital flows are shifting — which undervalued consumer staples companies deserve attention?

According to Zhichong Finance APP, as the US stock market enters a dense window for Q2 earnings reports, investors are turning their attention to the consumer staples sector amid economic uncertainty, focusing on pricing strategies, consumer demand, and trends in profit margins to screen for high-quality targets with a margin of safety.

Seekingalpha reports that many blue-chip stocks are considered defensive investments, and companies with attractive valuations may draw increased attention. The agency has identified a batch of undervalued consumer staples leaders worth watching this earnings season, covering several segments including packaged foods, food distribution, supermarket retail, tobacco, beverages, home and personal care.

Among them, Conagra (CAG.US), Campbell Soup Company (CPB.US), General Mills (GIS.US), and United Natural Foods (UNFI.US) received the highest A+ ratings, making them the most undervalued names in the sector;

Following closely are high-quality companies with A ratings, including Albertsons (ACI.US), Darling Ingredients (DAR.US), Kraft Heinz (KHC.US), Altria (MO.US), Pilgrim's Pride (PPC.US), Molson Coors Beverage (TAP.US);

Additionally, Cal-Maine Foods (CALM.US), Clorox (CLX.US), Coty (COTY.US) and others earned A- ratings and also have considerable room for valuation recovery.

Major Market Rotation: Money “Votes With Its Feet”

As the earnings season progresses, there is a remarkable rotation in market style. The previously overheated high-valuation tech sector, such as AI-fueled chips, remains under pressure and has seen significant price corrections. Risk aversion is rising, resulting in a substantial outflow from highly volatile growth segments into defensive sectors with strong earnings certainty and reasonable valuations.

The latest weekly capital flows in US stock ETFs clearly illustrate this defensive rotation. For the week ending July 24, among the 11 major S&P 500 industry sectors, 7 sectors saw net capital inflows, with defensive sectors topping the inflow rankings, while high-volatility growth and financial sectors faced outflows.

According to etfdb.com data, the combined net inflow for the 11 S&P 500 sector-tracking ETFs last week was approximately $349.11 million. Defensive sectors showed dominant attraction for capital: the Healthcare ETF (XLV) led with $360.84 million in net inflows, followed by the Consumer Staples ETF (XLP) with $313.64 million, and the Industrials ETF (XLI) with $310.86 million.

By comparison, the Financials ETF (XLF) saw a single-week net outflow of $403.82 million, making it the sector with the largest weekly outflow. Consumer Discretionary ETF (XLY) and Communication Services ETF (XLC) had net outflows of $343.6 million and $295.48 million respectively.

Meanwhile, there was a divergence in precious metals: the Gold ETF (GLD) recorded a single-week net inflow of $1.33 billion with the price rising 1.12% in tandem; however, the Silver ETF (SLV) saw a mild net outflow of $30.23 million.

Crypto assets became the hardest hit by outflows that week. Bitcoin ETF (IBIT) had a single-week net outflow of $1.29 billion, while the price of Bitcoin fell by 3.26% during the same period, highlighting strong selling sentiment for risk assets. The 1x Short Bitcoin Futures ETF (BITI) recorded an $8.96 million outflow.