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4 Blue-Chip Stocks to Bet on as Dow Hits All-Time High
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Wall Street has resumed its rally after starting January on a volatile note. All the major indexes officially entered the bull market last week, with the S&P 500 hitting an all-time high and recording its highest close since January 2022.
On Jan 22, the Dow extended its bull run and closed above the 38,000 mark for the first time. The Dow ended Jan 22 at 38,001.81 points. The blue-chip index crossed the 37,000 mark on Dec 13, 2023, and took less than a month to hit an all-time high.
Rising optimism that the Federal Reserve will soon end its monetary tightening campaign as inflation has declined sharply and a positive outlook from economists that the economy will have a softer landing than expected earlier has helped blue-chip stocks extend their rally.
The Federal Reserve has increased interest rates by 525 basis points since March 2022 but left its benchmark policy rate unchanged in the range of 5.25-5.50% in its past three FOMC meetings.
Also, a dovish outlook from Federal Reserve officials that it will try not to keep interest rates higher for a longer period has raised optimism that rate cuts are on the anvil this year. Markets are now pricing in at least three 25-basis point rate cuts in 2024.
This bodes well for the economy as lower interest rates reduce the cost of borrowing and give more spending power to consumers.
The U.S. economy also expanded at a solid pace last year despite inflationary pressures. The third-quarter GDP grew 4.9% and expectations are high that the final quarter of 2023 also grew at a rapid pace.
This has seen consumer sentiment soaring to a two-and-a-half-year high. The preliminary index of consumer sentiment in January showed a reading of 78.8, surpassing estimates and the December reading of 69.7. The 13.1% jump also marks the fastest rise since December 2005.
Our Choices
Given the positive sentiment and bright outlook, investors should bet on these four fundamentally strong blue-chip stocks, namely American Express Company (AXP - Free Report) , Apple Inc. (AAPL - Free Report) , International Business Machines Corporation (IBM - Free Report) and Microsoft Corporation (MSFT - Free Report) . These companies are strategically positioned to take advantage of the overall upward trend in the market. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Express Company is a diversified financial services company, offering charge and credit payment card products, and travel-related services worldwide. AXP’s range of products and services include charge card, credit card and other payment, and financing products; Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants; Network services; other fee services, including fraud prevention services and the design and operation of customer loyalty programs; Expense management products and services; and Travel-related services.
American Express has an expected earnings growth rate of 14% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. AXP presently has a Zacks Rank #2.
Apple Inc.’s business primarily runs around its flagship iPhone. However, the Services portfolio of AAPL, which includes revenues from cloud services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services, has now become the cash cow. Moreover, non-iPhone devices like Apple Watch and AirPod have gained significant traction.
Apple has an expected earnings growth rate of 7.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. AAPL currently carries a Zacks Rank #2.
International Business Machines Corporation has gradually evolved as a provider of cloud and data platforms. IBM’s acquisition of Red Hat, in particular, has helped it strengthen its competitive position in the hybrid cloud market. In addition, International Business Machinesprovides advanced information technology solutions, computer systems, quantum computing and super-computing solutions, enterprise software, storage systems and microelectronics.
International Business Machines has an expected earnings growth rate of 4.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days. IBM presently carries a Zacks Rank #2.
Microsoft Corporation is one of the largest broad-based technology providers in the world. MSFT dominates the PC software market, with more than 73% of the market share for desktop operating systems. Microsoft Corporation’s Microsoft 365 application suite is one of the most popular productivity software globally. MSFT is also one of the prominent public cloud providers that can deliver a wide variety of infrastructure-as-a-service and platform-as-a-service solutions at scale.
Microsoft Corporation has an expected earnings growth rate of 13.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. MSFT presently has a Zacks Rank #2.
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4 Blue-Chip Stocks to Bet on as Dow Hits All-Time High
Wall Street has resumed its rally after starting January on a volatile note. All the major indexes officially entered the bull market last week, with the S&P 500 hitting an all-time high and recording its highest close since January 2022.
On Jan 22, the Dow extended its bull run and closed above the 38,000 mark for the first time. The Dow ended Jan 22 at 38,001.81 points. The blue-chip index crossed the 37,000 mark on Dec 13, 2023, and took less than a month to hit an all-time high.
Rising optimism that the Federal Reserve will soon end its monetary tightening campaign as inflation has declined sharply and a positive outlook from economists that the economy will have a softer landing than expected earlier has helped blue-chip stocks extend their rally.
The Federal Reserve has increased interest rates by 525 basis points since March 2022 but left its benchmark policy rate unchanged in the range of 5.25-5.50% in its past three FOMC meetings.
Also, a dovish outlook from Federal Reserve officials that it will try not to keep interest rates higher for a longer period has raised optimism that rate cuts are on the anvil this year. Markets are now pricing in at least three 25-basis point rate cuts in 2024.
This bodes well for the economy as lower interest rates reduce the cost of borrowing and give more spending power to consumers.
The U.S. economy also expanded at a solid pace last year despite inflationary pressures. The third-quarter GDP grew 4.9% and expectations are high that the final quarter of 2023 also grew at a rapid pace.
This has seen consumer sentiment soaring to a two-and-a-half-year high. The preliminary index of consumer sentiment in January showed a reading of 78.8, surpassing estimates and the December reading of 69.7. The 13.1% jump also marks the fastest rise since December 2005.
Our Choices
Given the positive sentiment and bright outlook, investors should bet on these four fundamentally strong blue-chip stocks, namely American Express Company (AXP - Free Report) , Apple Inc. (AAPL - Free Report) , International Business Machines Corporation (IBM - Free Report) and Microsoft Corporation (MSFT - Free Report) . These companies are strategically positioned to take advantage of the overall upward trend in the market. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Express Company is a diversified financial services company, offering charge and credit payment card products, and travel-related services worldwide. AXP’s range of products and services include charge card, credit card and other payment, and financing products; Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants; Network services; other fee services, including fraud prevention services and the design and operation of customer loyalty programs; Expense management products and services; and Travel-related services.
American Express has an expected earnings growth rate of 14% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. AXP presently has a Zacks Rank #2.
Apple Inc.’s business primarily runs around its flagship iPhone. However, the Services portfolio of AAPL, which includes revenues from cloud services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services, has now become the cash cow. Moreover, non-iPhone devices like Apple Watch and AirPod have gained significant traction.
Apple has an expected earnings growth rate of 7.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. AAPL currently carries a Zacks Rank #2.
International Business Machines Corporation has gradually evolved as a provider of cloud and data platforms. IBM’s acquisition of Red Hat, in particular, has helped it strengthen its competitive position in the hybrid cloud market. In addition, International Business Machinesprovides advanced information technology solutions, computer systems, quantum computing and super-computing solutions, enterprise software, storage systems and microelectronics.
International Business Machines has an expected earnings growth rate of 4.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days. IBM presently carries a Zacks Rank #2.
Microsoft Corporation is one of the largest broad-based technology providers in the world. MSFT dominates the PC software market, with more than 73% of the market share for desktop operating systems. Microsoft Corporation’s Microsoft 365 application suite is one of the most popular productivity software globally. MSFT is also one of the prominent public cloud providers that can deliver a wide variety of infrastructure-as-a-service and platform-as-a-service solutions at scale.
Microsoft Corporation has an expected earnings growth rate of 13.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. MSFT presently has a Zacks Rank #2.