1 July 2009 - Shares of most consumer staples companies rose on Wednesday after food maker General Mills Inc said it sees commodity prices easing.
"We expect the rate of input cost inflation to moderate," said Ken Powell, chairman and chief executive officer of the maker of Cheerios cereal and Yoplait yogurt, in a statement.
The weakening dollar was another factor aiding some stocks in the sector. A weaker dollar typically lifts the value of sales made overseas.
Kraft Foods Inc, Coca-Cola Co, Procter & Gamble Co and H.J. Heinz Co are among the companies with large overseas sales.
"The dollar is a slight contributing factor, but I would say it's probably General Mills' statement more than anything else that's the positive for the group today," Tim Ghriskey, chief investment officer at Solaris Asset Management, told Reuters.
Companies ranging from Kraft Foods to Procter & Gamble were all hammered last year by rising costs for commodities ranging from oil to wheat.
Even as those prices have eased, investors have still been skittish, waiting for companies in the sector to be clearer about the benefits of lower commodity costs.
"It's one thing for investors to speculate that input costs are down, but it's another thing when a company says it's benefiting their bottom line," Ghriskey added.
Edward Jones analyst Jack Russo echoed Ghriskey's thinking.
"They may have been a bit more direct at saying the next six months are doing well," Russo said of General Mills' comments on commodity costs.
General Mills shares were up 3.3 percent to $57.86 in afternoon trading Wednesday on the New York Stock Exchange, while Kraft shares were up 5.2 percent at $26.66.
Coca-Cola shares gained 3.3 percent to $49.55, while Dr Pepper Snapple Group Inc's stock rose 5 percent to $22.23. Procter & Gamble's stock was up 3 percent at $52.49 and Heinz shares were up 3.4 percent at $36.92.
The S&P consumer staples index .GSPS was up 2.1 percent to 243.23 on Wednesday afternoon, while the Dow Jones industrial average .DJI was 1.2 percent higher to 8,548.65.
Ghriskey said he was unsure if the gains related to commodity costs were sustainable.
"Commodity prices are always going to be volatile. Certainly these lower input prices are sustainable for now, but I would never say anything is permanent."