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Dow Jones Sets New Record: More Upside Ahead for ETFs?
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The Dow Jones is at the new high thanks to the $1 trillion infrastructure bill passing the Senate on a bipartisan basis (the bill now needs to be passed in the House). The Democratic majority in the House should make it easier to pass compared to the 50/50 Senate.
Let’s take a look if the rally is sustainable.
Infrastructure Plan
Senate’s approval for infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years is a tailwind for the index. The 2,702-page legislation is aimed at establishing the United States with the world's best economic infrastructure. Total spending may go up to $1.2 trillion if the plan is extended to eight years.
The infrastructure bill will provide $100 billion toward roads, bridges and other major projects. The plan allocates $39 billion to modernize public transit and improve access for disabled people. In addition, the bill has proposed $66 billion for passenger and freight rail, $15 billion for electric vehicles and buses, and $17 billion for airports, ports and waterways.
The plan will invest $50 billion and $55 billion in water infrastructure and clean water projects, respectively. Moreover, $65 billion will be invested in high-speed Internet (broadband), $21 billion in environmental clean-up and $73 billion in Power infrastructure. Since the Dow Jones has exposure to industrial sector, such a bill is helpful for the index (read: ETFs To Play U.S. Infrastructure Overhaul).
Oil Price Rally
Furthermore, it has been noticed lately that 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. With such big infrastructure bill being passed in the Senate, cyclical sectors like energy rallied. We expect the trend to continue in the near term if activity keeps up momentum.United States Oil Fund LP (USO - Free Report) gained 2.32% on Aug 10 and is up 44.4% this year.
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. Now, since the Dow Jones is a price-weighted index, bullishness over this high-priced large-cap cohort has made the case for the Dow investing more appealing.
ETFs in Focus
Therefore, investors seeking a momentum play, can bet on SPDR Dow Jones Industrial Average ETF (DIA - Free Report) (a Zacks Rank #1 (Strong Buy), Guggenheim Dow Jones Industrial Average Dividend ETF (DJD - Free Report) (a Zacks Rank #3 (Hold)) and iShares Dow Jones US ETF (IYY - Free Report) (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.
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Dow Jones Sets New Record: More Upside Ahead for ETFs?
The Dow Jones is at the new high thanks to the $1 trillion infrastructure bill passing the Senate on a bipartisan basis (the bill now needs to be passed in the House). The Democratic majority in the House should make it easier to pass compared to the 50/50 Senate.
Let’s take a look if the rally is sustainable.
Infrastructure Plan
Senate’s approval for infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years is a tailwind for the index. The 2,702-page legislation is aimed at establishing the United States with the world's best economic infrastructure. Total spending may go up to $1.2 trillion if the plan is extended to eight years.
The infrastructure bill will provide $100 billion toward roads, bridges and other major projects. The plan allocates $39 billion to modernize public transit and improve access for disabled people. In addition, the bill has proposed $66 billion for passenger and freight rail, $15 billion for electric vehicles and buses, and $17 billion for airports, ports and waterways.
The plan will invest $50 billion and $55 billion in water infrastructure and clean water projects, respectively. Moreover, $65 billion will be invested in high-speed Internet (broadband), $21 billion in environmental clean-up and $73 billion in Power infrastructure. Since the Dow Jones has exposure to industrial sector, such a bill is helpful for the index (read: ETFs To Play U.S. Infrastructure Overhaul).
Oil Price Rally
Furthermore, it has been noticed lately that 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. With such big infrastructure bill being passed in the Senate, cyclical sectors like energy rallied. We expect the trend to continue in the near term if activity keeps up momentum.United States Oil Fund LP (USO - Free Report) gained 2.32% on Aug 10 and is up 44.4% this year.
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. Now, since the Dow Jones is a price-weighted index, bullishness over this high-priced large-cap cohort has made the case for the Dow investing more appealing.
ETFs in Focus
Therefore, investors seeking a momentum play, can bet on SPDR Dow Jones Industrial Average ETF (DIA - Free Report) (a Zacks Rank #1 (Strong Buy), Guggenheim Dow Jones Industrial Average Dividend ETF (DJD - Free Report) (a Zacks Rank #3 (Hold)) and iShares Dow Jones US ETF (IYY - Free Report) (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.