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5 Stocks Powering the Dow ETF Year to Date

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The Dow Jones Industrial Average touched the milestone of 40,000 for the first time on strong corporate earnings and renewed bets for rate cuts. SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , which tracks the Dow Jones Index, has gained 6.4% so far this year. While most of the stocks in the ETF portfolio have been rising this year, we have highlighted five that have been leading the way higher. These are American Express Company (AXP - Free Report) , Walmart Inc. (WMT - Free Report) , Inc. (AMZN - Free Report) , The Goldman Sachs Group Inc. (GS - Free Report) and Merck & Co. Inc. (MRK - Free Report) .

The blue-chip index has outperformed in recent months, with the broadening out of the stock market rally beyond the tech sector. Cyclical stocks, banks and small-cap stocks have all shown an upward trend in recent weeks, powering the blue-chip index. Bouts of stronger earnings and stronger guidance from many mega-cap stocks also propelled the index (read: ETFs to Bet on Dow Jones' Longest Winning Streak of 2024).

The reconstruction of the blue-chip index is also paying off. Amazon, which joined the index on Feb 26, provided a boost to the index after it reported blockbuster first-quarter 2024 results. The e-commerce giant beat both earnings and revenue estimates driven by growth in its advertising and AI-powered cloud computing units.

Inflation in the United States cooled down for the first time in six months, sparking new bets on Fed rate cuts as soon as September. Low rates are favorable for stocks as they reduce the cost of borrowing, often needed to finance the expansion of companies. Lower rates typically reduce the attractiveness of fixed-income investments like bonds, leading investors to seek higher returns in the equity markets. According to the CME FedWatch Tool, around 70% of traders now expect at least one cut by the September meeting, a notable increase from a week ago.

DIA in Focus

SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with AUM of $33.3 billion and an average daily volume of 3.7 million shares. It tracks the Dow Jones Industrial Average Index, holding 30 stocks in its basket, with each making up for less than 8.6% share. Financials (23.2%), information technology (18.8%), healthcare (18.5%), consumer discretionary (14.7%) and industrials (13.9%) are the top five sectors (read: ETFs to Make the Most of the Sector Rotation).

SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Best-Performing Stocks of DIA

American Express is a diversified financial services company offering charge and credit payment card products and travel-related services worldwide. Shares of AXP have risen 28.8% so far this year. American Express earnings are expected to grow 15% this year. It makes up for 3.97% share in DIA portfolio. It has a Zacks Rank of 3 (Hold).

Walmart has evolved from being just a traditional brick-and-mortar retailer into an omnichannel player. It is engaged in the operation of retail, wholesale and other units worldwide. The stock has risen 21.8% this year. Walmart has an expected earnings growth rate of 4.3% for this year and has a Zacks Rank #3.

Amazon is one of the largest e-commerce providers. It has jumped nearly 21% this year and accounts for 3% in the fund’s basket. AMZN is expected to see earnings growth of 56.5% for this year and accounts for 3% of DIA portfolio. The stock has a Zacks Rank #3.

Goldman is a leading global financial holding company providing IB, securities, investment management and consumer banking services to a diversified client base. The stock has gained more than 20% so far this year and has an estimated earnings growth rate of 60.5% for this year. Goldman accounts for a 7.6% share in DIA’s portfolio and has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Merck operates as a healthcare company worldwide. It has gained more than 20% so far this year and accounts for 2.1% in the fund’s basket. Merck is expected to see earnings growth of 474.2% for this year and has a Zacks Rank #3.

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