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Dow Jones Turns Positive for 2020: 7 Stocks Driving ETFs
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Wall Street seems super-excited as the Dow reclaimed 28,000 last week while the S&P 500 and the Nasdaq hit highs at regular intervals. In fact, the Dow Jones industrial average — the laggard in the trio — turned positive for 2020 on Aug 28, having gained about 0.6%. The blue-chip 30-stock index added about 2.6% last week. For the year, the index is now up about 0.6% versus 8.6% gains in the S&P 500 and a jump of 30.4% in the Nasdaq.
What Led to the Rally?
Fed to Keep Rates Lower for Longer
On Aug 27, the Federal Reserve announced a new strategy to bring back the United States to full employment level and drive inflation back to healthier levels. Under the new scheme, the U.S. central bank will seek to achieve inflation averaging 2% over time, counterbalancing below-2% periods with higher inflation "for some time."
The change in the Fed’s tone suggests the its key overnight interest rate, already at rock-bottom levels, will remain so in the medium term as the central bank is striving to drive inflation. Since a low-rate environment is great for stocks, large-cap indexes rallied (read: Fed Targets "Average Inflation" of 2%: ETF Strategies to Play).
Upbeat Economic Datapoints
A slew of upbeat economic datapoints also helped the Dow Jones rally. U.S. consumer spending rose 1.9% in July, beating a Reuters forecast of a 1.5% gain, the Commerce Department said. Personal income was also stronger than expected, rising 0.4% while economists had forecast a decline of 0.2%.
Oil Rally
Furthermore, it has been noticed lately that the Dow Jones shares a deep relationship with oil price movement. Though the energy sector rally spreads optimism over the broader market as a whole, in most cases, on a particular day of oil surge, the rise in the Dow Jones is steeper than that of the S&P 500, or vice versa. Last week, WTI crude fund United States Oil Fund, LPUSO added about 1.2%.
Focus on Blue-Chip Stocks
The Dow Jones assigns greater weight to higher-priced stocks, which is one of the reasons behind the recent surge. Overall, blue-chip stocks are performing exceptionally of late.
Stocks That Took the Dow Jones to New Height
Against the aforementioned backdrop, below we highlight a few stocks that helped the Dow Jones to turn positive in 2020.
Visa (V - Free Report) ): Weight in Dow (5.08%), Stock Up 2.22% on Aug 28
McDonald's Corp (MCD - Free Report) ): Weight in Dow (5.11%), Stock Up 1.28% on Aug 28
Microsoft (MSFT - Free Report) ): Weight in Dow (5.45%), Stock Up 1.03% on Aug 28
Walmart (WMT - Free Report) ): Weight in Dow (3.29%), Stock Up 2.69% on Aug 28
Disney (DIS): Weight in Dow (3.22%), Stock Up 1.35% on Aug 28
The Coca-Cola Company (KO - Free Report) ): Weight in Dow (1.16%), Stock Up 3.32% on Aug 28
Intel (INTC - Free Report) : Weight in Dow (1.19%), Stock Up 2.09% on Aug 28
ETFs in Focus
Investors seekinga momentum play, can also bet on SPDR Dow Jones Industrial Average ETF (DIA - Free Report) (a Zacks Rank #3 (Hold), Guggenheim Dow Jones Industrial Average Dividend ETF (DJD - Free Report) ) and iShares Dow Jones US ETF (IYY - Free Report) (a Zacks Rank #2 (Buy)). Investors can also settle for leveraged Dow ETF plays as long as the trend favors them. Here, ProShares Ultra Dow30 (DDM - Free Report) ) and ProShares UltraPro Dow30 (UDOW - Free Report) ) are a couple of choices (see all leveraged equity ETFs here).
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Dow Jones Turns Positive for 2020: 7 Stocks Driving ETFs
Wall Street seems super-excited as the Dow reclaimed 28,000 last week while the S&P 500 and the Nasdaq hit highs at regular intervals. In fact, the Dow Jones industrial average — the laggard in the trio — turned positive for 2020 on Aug 28, having gained about 0.6%. The blue-chip 30-stock index added about 2.6% last week. For the year, the index is now up about 0.6% versus 8.6% gains in the S&P 500 and a jump of 30.4% in the Nasdaq.
What Led to the Rally?
Fed to Keep Rates Lower for Longer
On Aug 27, the Federal Reserve announced a new strategy to bring back the United States to full employment level and drive inflation back to healthier levels. Under the new scheme, the U.S. central bank will seek to achieve inflation averaging 2% over time, counterbalancing below-2% periods with higher inflation "for some time."
The change in the Fed’s tone suggests the its key overnight interest rate, already at rock-bottom levels, will remain so in the medium term as the central bank is striving to drive inflation. Since a low-rate environment is great for stocks, large-cap indexes rallied (read: Fed Targets "Average Inflation" of 2%: ETF Strategies to Play).
Upbeat Economic Datapoints
A slew of upbeat economic datapoints also helped the Dow Jones rally. U.S. consumer spending rose 1.9% in July, beating a Reuters forecast of a 1.5% gain, the Commerce Department said. Personal income was also stronger than expected, rising 0.4% while economists had forecast a decline of 0.2%.
Oil Rally
Furthermore, it has been noticed lately that the Dow Jones shares a deep relationship with oil price movement. Though the energy sector rally spreads optimism over the broader market as a whole, in most cases, on a particular day of oil surge, the rise in the Dow Jones is steeper than that of the S&P 500, or vice versa. Last week, WTI crude fund United States Oil Fund, LP USO added about 1.2%.
Focus on Blue-Chip Stocks
The Dow Jones assigns greater weight to higher-priced stocks, which is one of the reasons behind the recent surge. Overall, blue-chip stocks are performing exceptionally of late.
Stocks That Took the Dow Jones to New Height
Against the aforementioned backdrop, below we highlight a few stocks that helped the Dow Jones to turn positive in 2020.
Visa (V - Free Report) ): Weight in Dow (5.08%), Stock Up 2.22% on Aug 28
McDonald's Corp (MCD - Free Report) ): Weight in Dow (5.11%), Stock Up 1.28% on Aug 28
Microsoft (MSFT - Free Report) ): Weight in Dow (5.45%), Stock Up 1.03% on Aug 28
Walmart (WMT - Free Report) ): Weight in Dow (3.29%), Stock Up 2.69% on Aug 28
Disney (DIS): Weight in Dow (3.22%), Stock Up 1.35% on Aug 28
The Coca-Cola Company (KO - Free Report) ): Weight in Dow (1.16%), Stock Up 3.32% on Aug 28
Intel (INTC - Free Report) : Weight in Dow (1.19%), Stock Up 2.09% on Aug 28
ETFs in Focus
Investors seekinga momentum play, can also bet on SPDR Dow Jones Industrial Average ETF (DIA - Free Report) (a Zacks Rank #3 (Hold), Guggenheim Dow Jones Industrial Average Dividend ETF (DJD - Free Report) ) and iShares Dow Jones US ETF (IYY - Free Report) (a Zacks Rank #2 (Buy)). Investors can also settle for leveraged Dow ETF plays as long as the trend favors them. Here, ProShares Ultra Dow30 (DDM - Free Report) ) and ProShares UltraPro Dow30 (UDOW - Free Report) ) are a couple of choices (see all leveraged equity ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>