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The Zacks Analyst Blog Highlights DIA, XLF, IYY and UnitedHealth
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For Immediate Release
Chicago, IL – February 28, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. ETFs recently featured in the blog include: SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , Financial Select Sector SPDR Fund (XLF - Free Report) , Dow Jones U.S. ETF (IYY - Free Report) and UnitedHealth Group (UNH - Free Report) .
Here are highlights from Tuesday’s Analyst Blog:
4 Reasons to Bet on Dow Jones ETFs Now
Among the three key U.S. equity gauges, the Dow Jones won in 2022 only to lag the S&P 500 and the Nasdaq in 2023. SPDR Dow Jones Industrial Average ETF has added 18.7% past year, falling behind the S&P 500 (up 27.2%) and the Nasdaq-100 (up 48.5%). This year too, the Dow Jones has trailing (up 3.6%) the S&P 500 (up 7.1%) and the Nasdaq-100 (up 8.4%).
The Dow Jones lagged its peers because the Fed has been less hawkish in the past one year, which favored the growth-stock-heavy Nasdaq. The Dow Jones stocks are value stocks in nature that perform well in a higher rate environment.
Moreover, the recent rally in the S&P 500 and the Nasdaq has been attributed to the huge growth in "Magnificent Seven" stocks – Nvidia, Amazon, Microsoft, Apple, Meta, Alphabet and Tesla. Barring considerable exposure to these seven magic stocks, outperformance in any index seems impossible lately.
However, even if the Dow Jones underperforms its heavyweight peers in the past one year, there are some factors that can fuel the Dow rally in the coming days. Let's delve a little deeper.
Amazon Joins Dow Jones
Notably, the Dow Jones is a smaller average than the S&P 500, with just 30 components, and it's weighted by the share price of the stocks instead of the companies' total market value. The three largest tech stocks in the Dow by market capitalization as of Friday were Apple, Microsoft and Salesforce, while key companies of the latest Wall Street rally such as Nvidia and Alphabet were excluded.
On Feb 26, 2024, Amazon has officially joined the Dow Jones, taking the place of Walgreens Boots Alliance.With shares of the leading e-commerce platform soaring over 80% in the past year and bolstering the Wall Street rally, Amazon's entry to the Dow Jones is very crucial for the blue-chip index's future outperformance.
Based on short-term price targets offered by 43 analysts, the average price target for Amazon comes to $202.26. The forecasts range from a low of $123.00 to a high of $230.00. The average price target represents an increase of 15.58% from the last closing price of $174.99.
Steepening Yield Curve in the Cards?
As recessionary fears are ebbing and inflation has been falling, the Fed is likely to go slow in its policy tightening spree. The CME Fed Watch Tool reveals that there are 51.7% chances of rate cuts in June. Both situations will result in a steepening of the yield curve. A steepening yield curve is great for bank stocks as the pattern boosts banks' net interest rate margins.
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had a mixed Q4 this reporting season. But due to the steepening of the yield curve, financial stocks have been in a better position. Financial Select Sector SPDR Fund is up 6.2% this year (read: Bank ETFs in Focus on Mixed Q4 Earnings).
Relatively Cheaper Valuation
Cheaper valuation is another tailwind. At the current level, Dow Jones has a P/E of 16.82X, whereas the S&P 500 has a P/E of 17.86X and the Nasdaq-100 has a P/E of 22.70X. Cheaper valuation provided the Dow index the scope to fare better in the coming days, if other factors allow. Against this backdrop, investors can bet on iShares Dow Jones U.S. ETF and DIA.
Symmetric Sectoral Exposure
The Dow Jones has the highest exposure (21.66%) to financial stocks, followed by Information Technology (19.47%), healthcare (18.54%) and industrials (13.69%). Financial stocks are performing good this year. Healthcare stocks are recession-proof. UnitedHealth Group, a prominent component of the Dow with 8.82% exposure, gained 4.1% last month after beating Wall Street estimates in its fourth-quarter results.
Information Technology giants, in any case, are in great shape this year, owing to the AI craze. Industrials stocks have also been trying to log a recovery, as evident by the space's solid Zacks Rank of #3.
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.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights DIA, XLF, IYY and UnitedHealth
For Immediate Release
Chicago, IL – February 28, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. ETFs recently featured in the blog include: SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , Financial Select Sector SPDR Fund (XLF - Free Report) , Dow Jones U.S. ETF (IYY - Free Report) and UnitedHealth Group (UNH - Free Report) .
Here are highlights from Tuesday’s Analyst Blog:
4 Reasons to Bet on Dow Jones ETFs Now
Among the three key U.S. equity gauges, the Dow Jones won in 2022 only to lag the S&P 500 and the Nasdaq in 2023. SPDR Dow Jones Industrial Average ETF has added 18.7% past year, falling behind the S&P 500 (up 27.2%) and the Nasdaq-100 (up 48.5%). This year too, the Dow Jones has trailing (up 3.6%) the S&P 500 (up 7.1%) and the Nasdaq-100 (up 8.4%).
The Dow Jones lagged its peers because the Fed has been less hawkish in the past one year, which favored the growth-stock-heavy Nasdaq. The Dow Jones stocks are value stocks in nature that perform well in a higher rate environment.
Moreover, the recent rally in the S&P 500 and the Nasdaq has been attributed to the huge growth in "Magnificent Seven" stocks – Nvidia, Amazon, Microsoft, Apple, Meta, Alphabet and Tesla. Barring considerable exposure to these seven magic stocks, outperformance in any index seems impossible lately.
However, even if the Dow Jones underperforms its heavyweight peers in the past one year, there are some factors that can fuel the Dow rally in the coming days. Let's delve a little deeper.
Amazon Joins Dow Jones
Notably, the Dow Jones is a smaller average than the S&P 500, with just 30 components, and it's weighted by the share price of the stocks instead of the companies' total market value. The three largest tech stocks in the Dow by market capitalization as of Friday were Apple, Microsoft and Salesforce, while key companies of the latest Wall Street rally such as Nvidia and Alphabet were excluded.
On Feb 26, 2024, Amazon has officially joined the Dow Jones, taking the place of Walgreens Boots Alliance.With shares of the leading e-commerce platform soaring over 80% in the past year and bolstering the Wall Street rally, Amazon's entry to the Dow Jones is very crucial for the blue-chip index's future outperformance.
Based on short-term price targets offered by 43 analysts, the average price target for Amazon comes to $202.26. The forecasts range from a low of $123.00 to a high of $230.00. The average price target represents an increase of 15.58% from the last closing price of $174.99.
Steepening Yield Curve in the Cards?
As recessionary fears are ebbing and inflation has been falling, the Fed is likely to go slow in its policy tightening spree. The CME Fed Watch Tool reveals that there are 51.7% chances of rate cuts in June. Both situations will result in a steepening of the yield curve. A steepening yield curve is great for bank stocks as the pattern boosts banks' net interest rate margins.
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had a mixed Q4 this reporting season. But due to the steepening of the yield curve, financial stocks have been in a better position. Financial Select Sector SPDR Fund is up 6.2% this year (read: Bank ETFs in Focus on Mixed Q4 Earnings).
Relatively Cheaper Valuation
Cheaper valuation is another tailwind. At the current level, Dow Jones has a P/E of 16.82X, whereas the S&P 500 has a P/E of 17.86X and the Nasdaq-100 has a P/E of 22.70X. Cheaper valuation provided the Dow index the scope to fare better in the coming days, if other factors allow. Against this backdrop, investors can bet on iShares Dow Jones U.S. ETF and DIA.
Symmetric Sectoral Exposure
The Dow Jones has the highest exposure (21.66%) to financial stocks, followed by Information Technology (19.47%), healthcare (18.54%) and industrials (13.69%). Financial stocks are performing good this year. Healthcare stocks are recession-proof. UnitedHealth Group, a prominent component of the Dow with 8.82% exposure, gained 4.1% last month after beating Wall Street estimates in its fourth-quarter results.
Information Technology giants, in any case, are in great shape this year, owing to the AI craze. Industrials stocks have also been trying to log a recovery, as evident by the space's solid Zacks Rank of #3.
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 >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.