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The Dow is experiencing a fantastic July, with the blue-chip index extending a winning streak not seen in decades, thanks to upbeat corporate earnings and the possibility of a pause in rate hikes soon.
It, thus, makes sense to place bets on solid blue-chip players like JPMorgan Chase & Co. (JPM - Free Report) , Walmart Inc. (WMT - Free Report) and Johnson & Johnson (JNJ - Free Report) that can make the most of a Dow rally.
Dow Seals Longest Winning Streak in 36 Years
After a volatile trading session on Jul 26, the Dow was able to clinch its longest winning streak since Jan 20, 1987, per Dow Jones Market Data. The 30-stock blue-chip index scaled upward by 82.05 points, or 0.23%, to register its 13th consecutive trading session in the green.
The Dow’s latest milestone is now registered in the history books, and if the blue-chip gauge extends its winning streak for another trading session, it will notch its longest daily winning streak since June 1897, which was one year after the index was created in May 1896.
Corporate Profits Are Improving
The Dow was able to hold onto its positive momentum as the latest corporate quarterly earnings results were mostly encouraging for the blue-chip stocks.
3M Company’s (MMM - Free Report) shares moved northward after the company reported a second-quarter earnings beat. Similarly, The Coca-Cola Company’s (KO - Free Report) shares moved up on promising earnings results for the quarter that ended in June and a positive outlook for the rest of 2023.
The Boeing Company’s (BA - Free Report) shares also soared after the company’s free cash flow in the second quarter improved following an uptick in commercial aircraft deliveries.
Fed Raises Rates But Could Pause Again
Meanwhile, the Federal Reserve increased its interest rates by a quarter of a percentage point as prices of indispensable commodities remain above the central bank’s target of 2%.
The Fed has hiked interest rates in 11 of its last 12 meetings, and now the benchmark overnight interest rates are 5.25-5.50%, the highest level in more than 22 years.
However, Fed Chair Jerome Powell did indicate that interest rate hikes may be paused shortly, as was done in the June meeting. The Fed remains data-driven, and the central bank may choose to hold rates steady in the September meeting.
Market pundits are also betting on a rate hike pause in September. Almost 77.2% of them are expecting the Fed to pause rate hikes in the next meeting, per the CME FedWatch Tool.
Thus, chances of pausing rate hikes boosted investors’ sentiment and helped the Dow scale upward as well. After all, rate hikes impact consumer outlays, increase borrowing costs and hamper economic activities.
3 Best Blue Chip Stocks for a Winning Portfolio
Banking on such hopefulness, there will be a sharp run-up in the index of 30 stocks. The companies on the index are slated to advance further in the near term as they have large market capitalization, solid balance sheets, and steady cash flow.
JPMorgan is one of the biggest global banks. Now, a possible rate hike pause may not bode well for the bank, but its strong liquidity position and recent strategic acquisitions should certainly help it chug along in the near term.
JPMorgan has a Zacks Rank #1. The Zacks Consensus Estimate for JPM’s current-year earnings has moved up 7.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 25.8%. JPM’s estimated earnings growth rate for the next five-year period is 5%.
Walmart is now an omnichannel player and not just a traditional brick-and-mortar retailer. The company’s impressive comp sales are driving growth, while its e-commerce business is expanding.
Walmart has a Zacks Rank #2. The Zacks Consensus Estimate for WMT’s current-year earnings has moved up 0.3% over the past 60 days. The company’s expected earnings growth rate for next year is 10.5%. WMT’s estimated earnings growth rate for the next five-year period is 5.5%.
Johnson & Johnson operates through pharmaceuticals, medical devices, and consumer products divisions. While its MedTech division is enjoying strong fundamentals, the company remains engaged in expanding the labels of some of its marketed products.
Johnson & Johnson has a Zacks Rank #2. The Zacks Consensus Estimate for JNJ’s current-year earnings has moved up 0.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 5.7%. JNJ’s estimated earnings growth rate for the next five-year period is 5.5%.
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3 Top Blue Chip Stocks to Ride the Dow Rally
The Dow is experiencing a fantastic July, with the blue-chip index extending a winning streak not seen in decades, thanks to upbeat corporate earnings and the possibility of a pause in rate hikes soon.
It, thus, makes sense to place bets on solid blue-chip players like JPMorgan Chase & Co. (JPM - Free Report) , Walmart Inc. (WMT - Free Report) and Johnson & Johnson (JNJ - Free Report) that can make the most of a Dow rally.
Dow Seals Longest Winning Streak in 36 Years
After a volatile trading session on Jul 26, the Dow was able to clinch its longest winning streak since Jan 20, 1987, per Dow Jones Market Data. The 30-stock blue-chip index scaled upward by 82.05 points, or 0.23%, to register its 13th consecutive trading session in the green.
The Dow’s latest milestone is now registered in the history books, and if the blue-chip gauge extends its winning streak for another trading session, it will notch its longest daily winning streak since June 1897, which was one year after the index was created in May 1896.
Corporate Profits Are Improving
The Dow was able to hold onto its positive momentum as the latest corporate quarterly earnings results were mostly encouraging for the blue-chip stocks.
3M Company’s (MMM - Free Report) shares moved northward after the company reported a second-quarter earnings beat. Similarly, The Coca-Cola Company’s (KO - Free Report) shares moved up on promising earnings results for the quarter that ended in June and a positive outlook for the rest of 2023.
The Boeing Company’s (BA - Free Report) shares also soared after the company’s free cash flow in the second quarter improved following an uptick in commercial aircraft deliveries.
Fed Raises Rates But Could Pause Again
Meanwhile, the Federal Reserve increased its interest rates by a quarter of a percentage point as prices of indispensable commodities remain above the central bank’s target of 2%.
The Fed has hiked interest rates in 11 of its last 12 meetings, and now the benchmark overnight interest rates are 5.25-5.50%, the highest level in more than 22 years.
However, Fed Chair Jerome Powell did indicate that interest rate hikes may be paused shortly, as was done in the June meeting. The Fed remains data-driven, and the central bank may choose to hold rates steady in the September meeting.
Market pundits are also betting on a rate hike pause in September. Almost 77.2% of them are expecting the Fed to pause rate hikes in the next meeting, per the CME FedWatch Tool.
Thus, chances of pausing rate hikes boosted investors’ sentiment and helped the Dow scale upward as well. After all, rate hikes impact consumer outlays, increase borrowing costs and hamper economic activities.
3 Best Blue Chip Stocks for a Winning Portfolio
Banking on such hopefulness, there will be a sharp run-up in the index of 30 stocks. The companies on the index are slated to advance further in the near term as they have large market capitalization, solid balance sheets, and steady cash flow.
We have, thus, selected three such blue-chip stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
JPMorgan is one of the biggest global banks. Now, a possible rate hike pause may not bode well for the bank, but its strong liquidity position and recent strategic acquisitions should certainly help it chug along in the near term.
JPMorgan has a Zacks Rank #1. The Zacks Consensus Estimate for JPM’s current-year earnings has moved up 7.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 25.8%. JPM’s estimated earnings growth rate for the next five-year period is 5%.
Walmart is now an omnichannel player and not just a traditional brick-and-mortar retailer. The company’s impressive comp sales are driving growth, while its e-commerce business is expanding.
Walmart has a Zacks Rank #2. The Zacks Consensus Estimate for WMT’s current-year earnings has moved up 0.3% over the past 60 days. The company’s expected earnings growth rate for next year is 10.5%. WMT’s estimated earnings growth rate for the next five-year period is 5.5%.
Johnson & Johnson operates through pharmaceuticals, medical devices, and consumer products divisions. While its MedTech division is enjoying strong fundamentals, the company remains engaged in expanding the labels of some of its marketed products.
Johnson & Johnson has a Zacks Rank #2. The Zacks Consensus Estimate for JNJ’s current-year earnings has moved up 0.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 5.7%. JNJ’s estimated earnings growth rate for the next five-year period is 5.5%.