The Dow Jones steered past the 22,000 mark for the first time in its 120-year history, driven by robust earnings. Apple Inc (AAPL - Free Report) rallied on stellar earnings, which helped the blue-chip index hit the psychological milestone. The index also enjoyed an upward journey, powered by upbeat quarterly earnings results by several other blue-chip companies, including Boeing Co (BA - Free Report) .
Also, there has been a particularly sharp run-up in the stock price of blue-chips on signs of a strengthening economy. Real gross domestic product (GDP) rebounded in the second quarter and more than doubled from the first quarter.
As the Dowcontinues to scale record highs, it will be prudent to invest in stocks listed in the said index. Such companies are slated to gain further in the near term as they are well established and financially sound.
Dow Jones Hits 22,000 first the First Time
The Dow gained 52.32 points or 0.2% to close at 22,016.24 on Aug 2, marking its 32nd record close of the year. The 30-stock index closed above the 22,000 mark, reflecting the seventh fastest move to a 1000-point milestone. It just took 107 trading sessions for the blue-chip gauge to achieve such a feat. It had hit the 21,000 mark on Mar 1. Let us now have a look at the table of the index’s milestones.
|Trading Sessions Between 1,000 Point Milestones||Dow’s 1,000-Point Milestone||Dates of First Close Above 1,000-Milestone|
The Dow has hit three 1,000-point milestones this year and the journey hasn’t been a smooth one. The index improved in fits and starts over the past five months as investors remained skeptical about how efficiently President Trump will be able to implement his promised pro-growth policies. The latest setback to pass the bill to revamp the Affordable Care Act underlined those bearish sentiments.
Nevertheless, the Dow is trading up 11.4% on a year-to-date basis buoyed by healthy corporate earnings results and broadly encouraging economic data.
Catalysts Driving Dow
Earnings Blow Past Expectations
Apple Inc.’s stock drove the Dow above 22,000. The tech giant’s shares rose 4.7% after its quarterly earnings results topped expectations and iPhone sales met expectations. The iPhone maker posted fiscal third-quarter earnings of $1.67 a share, compared with $1.42 a year earlier. Earnings also came ahead of analysts’ estimates. Revenues of $45.41 billion edged past estimates, with sales of iPhones totaled 41.03 million more than 40.4 million in the same period last year. Remarkably, Apple’s revenues fell 10% in the Greater China region from year-ago quarter (read more: Apple Earnings Prove It No Longer Needs China to Succeed).
The blue-chip gauge’s steady advance was also powered by moves in shares of plane maker Boeing. The aerospace company has skyrocketed 53% so far this year, making it the best performer in the Dow. The company reported second-quarter 2017 adjusted earnings of $2.56 per share, beating analysts’ expectations and improving from last year’s loss of 44 cents per share. Escalating geopolitical risks, involving Syria and North Korea, has led to increased demand for defense products, which bodes well for Boeing (read More: Boeing Stock Flies to All-Time High After Q2 Earnings).
Several other blue-chip stocks like Goldman Sachs Group Inc (GS - Free Report) , 3M Co (MMM - Free Report) , Chevron Corporation (CVX - Free Report) , Verizon Communications Inc. (VZ - Free Report) , McDonald's Corporation (MCD - Free Report) and Caterpillar Inc. (CAT - Free Report) CAT), to name a few, have come up with promising quarterly results. In fact, the overall earnings for the quarter are on track to reach a new all-time quarterly record (read more: No Shortage of Revenue Surprises This Earnings Season).
US GDP Goes Past $19 Trillion for the First Time
On the economic front, thinks are also looking brighter. After a feeble start to the year, Americans spent more in the spring driving the U.S. economy beyond the $19 trillion mark for the first time. Real gross domestic product rebounded in the second quarter and more than doubled from the first quarter. Pick-up in consumer spending and an uptick in business investment in software, research and equipment boosted economic growth.
Consumer outlays grew 2.8% in the second quarter as Americans spent more on healthcare, groceries and clothes. Spending rebounded in the last quarter, buoyed by an uptick in household finances. Disposable income adjusted for inflation saw the best back-to-back quarters this year since the first half of 2015. Consumer spending was also driven by the strongest labor market in years.
Companies, in the meanwhile, increased investments in equipment like computers, which rose at a rate of 8.2%, the highest in almost two years. This also highlights the optimism among companies over demand in domestic and overseas markets. Among other bright spots, nonresidential fixed investment that includes structures and intellectual properties contributed 0.64 percentage points to growth. Government spending also increased at a clip of 0.7%, adding 0.12 point to growth (read more: US GDP Crosses $19TN for the First Time: 5 Best Gainers).
5 Blue-Chip Stocks to Buy for Solid Gains
Thanks to the aforementioned bullish factors, there has been a particularly sharp rally by the Dow. The companies under the index are slated to gain further in the near term as they have large market capitalization, strong balance sheets and solid cash flow. We have, thus, selected five such blue-chip stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Boeing is an aerospace company. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings advanced 6.4% over the last 60 days. The company has returned 52.9% on a year-to-date basis, higher than the industry’s gain of 25.6%. The company is projected to gain 29.6% this year, more than the industry’s estimated gain of 6.3%.
Caterpillar is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings rose 26.4% over the last 60 days. The company has returned 22% on a year-to-date basis, higher than the industry’s gain of 19.5%. The company is projected to gain 52.5% this year, more than the industry’s estimated gain of 25.3%.
E I Du Pont De Nemours And Co (DD - Free Report) is a science and technology-based company. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 1.6% over the last 60 days. The company has given a solid return of 12.2% on a year-to-date basis. It is likely to gain 16.1% this year, more than the industry’s projected gain of 9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Home Depot Inc (HD - Free Report) is a home improvement retailer. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings inched up 0.6% over the last 90 days. The company has returned 12.2% on a year-to-date basis, higher than the industry’s gain of 9.7%. The company is projected to gain 12% this year.
Intel Corporation (INTC - Free Report) is engaged in designing and manufacturing products and technologies, such as the cloud. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 4.2% over the last 60 days. The company has given positive returns on a year-to-date basis and is projected to gain 9.5%.
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