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Dow Attains All-Time High Level: 5 Terrific Picks

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On Oct 2, the Dow 30 — one of the equity markets’ most closely watched indexes — reached an all-time high. The 30-stock index has been performing exceptionally well during the last three months.

Recent optimism related to global trade war concerns and robust U.S. economy bolstered investors’ confidence enabling the blue-chip index to climb out of the rut. Consequently, investment in some of the Dow 30 stocks with favorable Zacks Rank and strong growth potential bodes well.
 

Dow Closes at All-Time High

On Oct 2, the Dow closed at 26,773.94, breaking its previous all-time high closing of 26,656.98, which was set on Sep 21. During the day’s trading the index reached its all-time high level of 26,824.78 exceeding its previous high of 26,769.15 recorded on Sep 21.

Despite severe stock market volatility, the index is up 8.3% year to date. The Dow has provided positive returns in six of the first nine months in 2018. In third-quarter 2018, the index provided positive returns in each month. The index also provided positive returns in eleven of the last 12 quarters.

Moreover, 21 components of the total portfolio of 30 stocks in the Dow 30 index have provided positive returns so far this year. A strong bunch of ten stocks have provided positive double-digit returns.

Trade-Related Concerns are Easing

At present, trade-related conflicts are somewhat easing. On Sep 30, the United States and Canada reached a landmark deal, which replaces the North American Free Trade Agreement (“NAFTA”). The new trilateral agreement will now be called the United States-Mexico-Canada Agreement (“USMCA”). Notably, Mexico has given its nod in August.

Formation was USMCA was very important for strategic reasons as these two countries are immediate neighbors of the United States. Moreover, Canada is the second largest trading partner of the United States. Additionally, Trump administration is hopeful that its tariff-related conflicts with the European Union will be settled amicably.

However, trade relations between the United States and its largest trading partner China remains a major concern. President, Trump has threatened to impose a new set of tariffs worth $267 billion on Chinese goods if the situation demands.

Inflationary Concerns Overblown

On Oct 2, the Federal Reserve Chairman Jerome Powell stated that inflation is under control and unlikely to be exaggerated in near future despite a tight labor market, historically-low unemployment and rising wages.

On Sep 28, the Department of Commerce reported that the U.S. Personal Consumption expenditure (“PCE”) index grew 0.2% in August. However, the 12-month increase in PCE index fell to 2.2% in August from 2.3% in July. The core PCE index (excluding food and energy) — Fed’s preferred gauge of inflation measure — remained steady at 2%.

Out Top Picks

Stock market momentum has remained largely unhindered despite volatility. Massive tax cut, business-friendly policies and steady economic activities resulted in robust earnings results. U.S. markets are well positioned to attract investors’ attention by offering high yields.

At this stage, we have narrowed down our search to five stocks within the Dow 30, each having a Zacks Rank # 2 (Buy) and strong growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows price performance of our five picks in the last six months.

Chevron Corp. (CVX - Free Report) : the company has expected earnings and sales growth of 120.8% and 17.7%, respectively, for current year. The Zacks Consensus Estimate for the current year has improved by 1% over the last 60 days.

Caterpillar Inc. (CAT - Free Report) : the company has expected earnings and sales growth of 69.2% and 20.1%, respectively, for current year. The Zacks Consensus Estimate for the current year has improved by 0.5% over the last 60 days.

Apple Inc. (AAPL - Free Report) : the company has expected earnings and sales growth of 14.3% and 4.9%, respectively, for current year. The Zacks Consensus Estimate for the current year has improved by 1.5% over the last 60 days.

Cisco Systems Inc. (CSCO - Free Report) : the company has expected earnings and sales growth of 14.2% and of 4.4%, respectively, for current year. The Zacks Consensus Estimate for the current year has improved by 3.1% over the last 60 days.

Exxon Mobil Corp. (XOM - Free Report) : the company has expected earnings and sales growth of 28.3% and 12%, respectively, for current year. The Zacks Consensus Estimate for the current year has improved by 0.9% over the last 60 days.

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