Extending its last year’s rally, Dow Jones touched 29,000 for the second time in three days, suggesting strong complacency in the market. The Fed’s accommodative interest rate policy, a resilient domestic economy and hopes of a phase one deal have been driving stocks higher.
Lower interest rates will keep borrowing costs down, thereby resulting in higher consumer spending and an upswing in economic activities. The U.S. economy has been witnessing steady growth backed by a strong job market, recovering housing market and higher consumer confidence. A technology surge, improving economic outlook and Q4 earnings optimism are adding to the strength. Though Middle East tensions resulted in some volatility in early 2020, it has abated for now (read: 10 Power-Packed ETFs to Buy for 2020).
The world’s two biggest powers are expected to sign phase one of the trade deal today but uncertainty returns with the latest report from U.S. Treasury Secretary Steven Mnuchin. The reports say that the United States will maintain tariffs on Chinese goods until the completion of the second phase of the U.S.-China trade agreement.
Per Mnuchin, President Donald Trump could consider easing tariffs if the world's two largest economies move quickly to seal a follow-up agreement. "If the president gets a Phase 2 in place quickly, he'll consider releasing tariffs as part of Phase 2.”
Given this, SPDR Dow Jones Industrial Average ETF (DIA - Free Report) tracking the Dow Jones Index has been in the spotlight. Let’s take a closer look at the fundamentals of DIA and its performance.
DIA in Focus
This is one of the largest and the most popular ETFs in the large-cap space with AUM of $23.1 billion and average daily volume of 2.7 million shares. Holding 30 blue chip stocks, the fund is widely spread across components with each holding less than 8% share. Information technology (21.6%), industrials (19.0%), financials (15.2%), healthcare (13.1%) and consumer discretionary (12.5%) are the top five sectors. DIA charges 17 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Why You Should Buy Growth ETFs Now).
Though most stocks in the fund’s portfolio have been moving north so far this year, we have highlighted the five best-performing stocks in the ETF that led the way higher with their respective positions in the fund’s basket:
Goldman Sachs Group (GS - Free Report) : This stock takes the fourth spot and accounts for 5.7% of the assets in the fund’s basket. It has gained 6.8% and witnessed solid earnings estimate revision of 28 cents over the past seven days for 2020. Its earnings are expected to increase 11.7% from the last year. Goldman has a Zacks Rank #3 (Hold) and a VGM Score of D. It belongs to a favorable Zacks industry (placed at the top 26% of 250+ industries).
Apple Inc. (AAPL - Free Report) : The stock has rallied about 6.5% so far this year. It saw positive earnings estimate revision of 6 cents over the past seven days for the fiscal year (ending September 2020) and its earnings are expected to increase 10.7% year over year. Apple currently has a Zacks Rank #2 (Buy) and a VGM Score of C. The stock falls under a Zacks industry (top 43%) and occupies the second position in DIA with 7.4% exposure. You can see the complete list of today’s Zacks #1 Rank stocks here.
McDonald's Corporation (MCD - Free Report) : The stock has jumped 4.9% and takes the sixth spot in the fund’s basket with 4.8% share. It saw negative earnings estimate revision of a penny over the past seven days for 2020 and has an expected earnings growth rate of 8.1%. The company has a Zacks Rank #3 and an unimpressive VGM Score of D. However, it belongs to a top-ranked Zacks industry (top 32%) (read: 10 ETFs That Have Been Investors' Favorites).
Visa (V - Free Report) : The stock has gained 4.3% so far this year and occupies the seventh position, accounting for 4.6% share in DIA. It has a Zacks Rank #3 and has an unattractive VGM Score of D. The company has seen negative earnings estimate revision of a penny for the year (ending September 2020) over the past month and has an expected earnings growth rate of 14%. The stock is part of a top-ranked Zacks industry (top 19%).
American Express Company (AXP - Free Report) : This stock takes 3% allocation in the fund’s basket and has gained 3.5% in the same time frame. The stock saw positive earnings estimate revision of a couple of cents for 2020 over the past seven days and has an estimated year-over-year earnings growth of 10.9%. American Express belongs to a bottom-ranked Zacks industry (bottom 20%). It carries a Zacks Rank #2 and has a VGM Score of C.
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