The S&P 500 is down 4.25% YTD. The consumer staples sector in the S&P 500 index is down only 2.11% YTD. In 2008 when the global credit crisis ravaged markets worldwide, consumer staples was the best performing sector with a decline of 16.61%. For example the financials were down about 50% that year. (Source: Periodic Table of Style Rotation — Why Diversification Matters, American Century Investments).

Generally consumer staple companies that make basic necessities of every day life such as dish washing liquids, soaps, toothpaste, etc. tend to offer stable growth and offer downside protection in adverse market conditions. People rarely cut down on consumer staples even when the economy is in recession. Items such as toothpaste, deodorant, soaps, etc. are cheap to afford. Companies in this sector make profits using economies of scale and product differentiation strategies. Investors looking for shelter in the coming storm this year may want to check out some of the stocks in this sector.

Analysts at Longbow Research have released their monthly report on the chemical industry. According to the report the chemical industry will face rising raw material costs in 2010 after a period of low raw material costs and stable pricing.

Resin prices have been rising throughout 2009 due to the rising feedstock costs, tightening supply and steadying demand according to the report. Apart from these, paint companies such as PPG Industries Inc. (NYSE: PPG), Sherwin-Williams Company (NYSE: SHW) and The Valspar Corporation (NYSE: VAL) have been feeling the squeeze as titanium dioxide producers have been steadily increasing prices throughout the year.

The report mentions that energy costs have been rising steadily and will affect those companies also that have little exposure to raw materials as energy and transportation costs make up an appreciable portion of COGS. Analysts believe that many of the recent strong results in the chemical industry were fueled primarily by lower raw material costs and restructuring. Analysts believe that companies such as Albemarle Corporation (NYSE: ALB), The Valspar Corporation, Ashland Inc. (NYSE: ASH), Ecolab Inc. (NYSE: ECL), FMC Corporation (NYSE: FMC), Sigma-Aldrich Corporation (NASDAQ: SIAL) and Lubrizol Corporation (NYSE: LZ) are positioned to outperform their peers but earnings will remain a risk until volume recovery materializes.

Analysts at Longbow believe that companies with exposure to housing, construction and auto manufacturing are at most risk for underperformance. This includes Spartech Corporation (NYSE: SEH), Ferro Corporation (NYSE: FOE), PolyOne Corporation (NYSE: POL), A. Schulman Inc (NASDAQ: SHLM), H.B.Fuller Company (NYSE: FUL), PPG Industries Inc. and Sherwin-Williams Company.

Ecolab Inc. (NYSE: ECL) was given a Buy rating by Bank of America Merrill Lynch.

The rationale for the rating was Bank of America’s expectation that 1) Ecolab will grow EPS by 11%, despite having negative volume growth in 2009, 2) The factors that helped expanding operating margins will persist in 2010, 3) Volume growth and 4) Forward P/E multiple expansion back towards the historical average.

The stock is currently trading at $45.38.

It was only a few months ago that many experts declared dividend investing dead, after almost all financial companies in the US cut or eliminated their distributions to shareholders. In recent months there has been a slow but steady trend of many companies showing their confidence in the economic rebound by raising distributions. Over the past week several dividend payers announced that their boards of directors have approved increases in cash dividends they send out to their stockholders quarterly. Especially bullish was the fact that most of the companies were established dividend payers with long histories of consistent dividend increases.

The companies which raised distributions are listed below: