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5 Dow Stocks That Helped the Index Score Big in 2019

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The record run in Dow stocks has been buoyed by easing U.S.-Sino trade tensions, three rate cuts in 2019 and positive economic data. Year to date, the Dow Jones Industrial Average has surged 23% and the index scaled to a record closing of 28,267.16 on Dec 17.

Easing Trade Tensions

Washington and Beijing recently agreed to the terms of a historic phase-one trade deal. As part of the accord, the United States called off the Dec 15 implementation of 15% tariffs on $160 billion worth of China goods — comprising toys, laptops, cell phones and clothing. Beijing also didn’t proceed with the retaliatory tariffs of 25% on American autos that were set to go into effect on the same day.

Moreover, Washington has decided to halve the tariff rate levied on Sep 1 on a list of Chinese goods, worth $120 billion, to 7.5%. However, to leverage negotiations for the second phase in 2020, Beijing has kept its 25% duty on $250 billion worth of Chinese goods in place.

In the next two years, Beijing will ramp up purchase of goods and services from Washington by at least $200 billion, added U.S. officials. The list of goods to be purchased comprises manufactured goods, agricultural goods and energy. With this, the U.S. officials believe that the country’s $419-billion trade deficit with China will be significantly lowered, which in turn will boost the nation’s GDP.

Precisely, Beijing has vowed to step up its purchases of agriculture products from Washington by $32 billion in the next two years. Apart from the agricultural purchases, the agreement covers issues like intellectual property protection and technology transfers.

3 Rate Cuts

Another factor fuelling the Dow rally is the interest rate cuts for three times by the Federal Reserve in 2019. The federal funds rate currently lies in the band of 1.50% to 1.75%, representing a decrease of three-quarters of a percentage point from the range at the beginning of 2019.

To counter recession fears that was largely fuelled by a protracted trade war and global economic slowdown, the Fed lowered its benchmark interest rate in July, September and October. As a result, it has been cheaper for the customers to borrow money for purchases of cars and houses and also for starting up new businesses.

The U.S. central bank in its final policy meeting confirmed that the actions taken so far this year have worked in favor and the economy is now in the record 11th year of expansion.

Positive Economic Data

America has witnessed the addition of 266,000 jobs in November, per data from the Labor Department. Since January, this is the highest number of monthly job addition in the domestic market. The country’s unemployment rate slipped to 3.5% in November from October’s 3.6%, added the Labor Department. This highlighted the lowest unemployment rate in 50 years for the country.

Industrial production data has also been strong. In November, the country’s industrial production — measuring the output of factory, mining and utility — rose 1.1% from October, marking the highest monthly increase since October 2017, announced the Federal Reserve. 

Moreover, this looks like the best time for domestic homebuilders in the past two decades given a severe housing shortage and a stronger economy.  Precisely, in December, the builder confidence touched the highest readingin 20 years, per the National Association of Homebuilders.

Per the commerce department, the trade deficit of America contracted 7.6% to $47.2 billion in October from September’s revised data of $51.1 billion. With this, the United States has reported the lowest trade deficit in 16 months, contributing to the nation’s GDP.

5 Stocks That Drove Dow

We have shortlisted five Dow stocks that have primarily helped the index score big in 2019. The stocks flaunt a Zacks Rank #2 (Buy) or 3 (Hold) and have gained significantly higher than the Dow so far this year. The stocks also have a favorable earnings outlook.

Headquartered in Redmond, WA, Microsoft Corporation (MSFT - Free Report) is the largest software company in the world. Year to date, the #2 Ranked stock has gained 52.3%. Moreover, the stock is likely to see earnings growth of 12.6% and 12.3% in fiscal years 2020 and 2021, respectively.

Year-to-Date Price Performance: MSFT

The Procter & Gamble Company (PG - Free Report) , headquartered in Cincinnati, OH, is a leading manufacturer of household products in the domestic market. The Zacks #2 Ranked stock has jumped 36.3% year to date. For fiscal years 2020 and 2021, the stock is likely to see earnings growth of 9.2% and 6%, respectively.

Year-to-Date Price Performance: PG

NIKE, Inc. (NKE - Free Report) , headquartered in Beaverton, OR, is among the notable designer and marketer of authentic athletic footwear. For fiscal 2020 and 2021, the company is likely to see earnings growth of 20% and 18%, respectively. The stock, with Zacks Rank of 2, has gained 34.4% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

Year-to-Date Price Performance: NKE

Headquartered in Cupertino, CA, Apple Inc. (AAPL - Free Report) is a leading designer and marketer of premium handsets. For fiscal years 2020 and 2021, the stock is likely to see earnings growth of 10% and 16%, respectively. The Zacks Rank #3 stock has gained 77.7% year to date. 

Year-to-Date Price Performance: AAPL

JPMorgan Chase & Co. (JPM - Free Report) , headquartered in New York, is a leading financial services company. The #3 Ranked stock has gained 41.6% year to date. The Zacks Consensus Estimate for 2019 and 2020 earnings has been revised upward in the past 60 days.

Year-to-Date Price Performance: JPM

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

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