Back to top

Image: Bigstock

Here's How Dow Jones Bounced Back: ETFs & Stocks in Focus

Read MoreHide Full Article

Wall Street rebounded on May 14, shrugging fear of prolonged virus-led U.S. economic downturn. The Dow Jones took charge of the rally among the key U.S. indexes, gaining 1.62% on May 14. It was followed by the S&P 500 (up 1.15%), the Nasdaq (up 0.91%) and the Russell 2000 (up 0.35%). Interestingly, it was the sharpest intraday rebound in two months for the Dow, per MarketWatch.

American Express (up 7.41%) and UnitedHealth (up 4.54%) played a key role in the Dow’s Thursday rally. Let’s take a look at the other factors.

Financial Sector’s Huge Contribution

As the financial sector was severely battered on May 13 after Fed Chair Powell warned of prolonged economic weakness in the United States, the group recovered the maximum on Thursday with the resumption of risk-on sentiments. Be it banks or credit card companies, all staged a sharp recovery on May 14 (read: Inverse ETFs Gain on Powell's Economic Warning).

American Express (up 7.41%), JPMorgan Chase (up 4.15%), Visa (up 2.15%) and Goldman Sachs (1.54%) played a key role in driving the Dow on Thursday. Bank stocks also rose on talks doing the rounds that Goldman Sachs (GS) is looking for banks that could be lucrative acquisition targets. The potential candidates include Wells Fargo (WFC), PNC and U.S. Bancorp. In fact, Wells Fargo stock gained as much as 6.8% on May 14.

Host of Acquisition Announcements

There were a few acquisition announcements too from the Dow candidates. Apple (AAPL) has purchased virtual reality company NextVR, in a move to foray into the virtual reality and related augmented reality technologies space.

Microsoft (MSFT) acquired Metaswitch to bolster its presence in the telecom market. Notably, Microsoft had acquired another company focused on the telecommunications market, Affirmed Networks, just few days back. Metaswitch’s clientele includes telecommunications companies British Telecom and Sprint.

Goldman Sachs plans to buy boutique wealth management custodian and technology company Folio. Folio would be the second wealth management company Goldman has acquired in two years, per CNBC.

Oil Price Recovery

Oil prices gained on May 14 on production shut-ins and growing demand for gas and reopening of economies. Furthermore, it has been noticed lately that the Dow Jones shares a deep relationship with oil price movement. Though the energy sector rally has spread optimism in the broader market as a whole, in most cases, on a particular day of oil surge, the spurt in the Dow Jones is steeper than that of the S&P 500, or vice versa (read: Oil Price Rebound, USO ETF & More).

ETFs in Focus

Therefore, investors seeking a momentum play can bet on SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , Guggenheim Dow Jones Industrial Average Dividend ETF (DJD - Free Report)  and iShares Dow Jones US ETF (IYY - Free Report) . Investors can also settle for leveraged Dow ETF plays as long as the trend favors them. Here, ProShares Ultra Dow30 (DDM - Free Report)  and ProShares UltraPro Dow30 (UDOW - Free Report)  is a couple of choices.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>