The Dow 30 – one of the three major stock indexes of the U.S. market – has been performing impressively so far in 2019. On Feb 22, the blue-chip index closed above 26,000 – a key technical barrier – for the first time after Nov 8, 2018. On Feb 25, the index further consolidated its position.
Positive news on the trade war front and Fed’s dovish monetary stance acted as primary catalysts behind the stock market rally. Consequently, it will be a prudent move to invest in Dow stocks with a favorable Zacks Rank.
Dow Rally Continues
The last year was extremely disappointing for the Dow. The index plunged 5.6% recording its worst ever yearly performance since 2008. However, the Dow started 2019 on a strong note. For the week ended Feb 22, the Dow recorded its ninth straight weekly gain. This was the blue-chip index’s longest weekly rally since May 1995.
Moreover, since 1964, this was the first time that the Dow gained in each of the first eight weeks of any calendar year. Year to date, the index is up 11.9%. Out of total 30 components, 28 are currently in the positive territory while only two are in negative territory. Half of the 30 stocks have provided double-digit returns so far in 2019.
Positive Developments on Trade War Front
The 11-month long trade dispute between the United States and China is heading toward a likely resolution. On Feb 24, President Donald Trump tweeted that the United States is planning to delay imposing tariffs on additional Chinese goods as trade related negotiations between the two countries have made substantial progress.
Notably, on Dec 1, Trump and his Chinese counterpart Xi Jinping reached an initial agreement to find a permanent solution to the trade-related conflict between the two countries. The truce will be valid for the next 90 days during which the two countries will try to solve bilateral trade conflicts.
On Feb 25, Trump told at a gathering of state governors that he is hopeful of a “signing ceremony” for the trade deal very soon. Per CNBC, the two countries are considering a late March meeting between Trump and Xi Jinping in Florida.
CNBC also reported that China has committed to import $1.2 trillion of U.S. exports. However, the two countries are yet to reach an agreement on the most crucial issues of forced transfer of technology and intellectual property.
Fed to Remain Patient Regarding Monetary Policy
On Jan 30, the Federal Reserve decided to keep the federal funds target rate unchanged in the range of 2.25% – 2.50%. Fed Chairman Jerome Powell stated that the central bank will be patient while taking a call on future rate hikes.
Instead of following a predetermined path, Fed will consider all economic parameters and market conditions carefully before reaching a decision. The central bank’s bond portfolio reduction strategy will also consider macro-economic metrics and trade related disruptions, and is not on “autopilot”, as suggested by the Fed Chair in December.
Our Top Picks
At this stage, it will be a prudent move to invest in Dow 30 stocks. We have narrowed down our search to four such stocks. Each of our picks has either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Boeing Co. BA: The company delivered average positive earnings surprise of 17.1% in the last four quarters. It carries a Zacks Rank #1. Year to date, the stock has gained 32.4%. The company has expected earnings growth of 25.7% for the current year. The Zacks Consensus Estimate for the current year has improved 11.3% over the past 60 days.
Cisco Systems Inc. CSCO: The company recorded average positive earnings surprise of 2.1% in the last four quarters. It carries a Zacks Rank #2. Year to date, the stock has rallied 17.2%. The company has expected earnings growth of 17.3% for the current year. The Zacks Consensus Estimate for the current year has improved 1% over the past 60 days.
United Technologies Corp. UTX: The company recorded average positive earnings surprise of 14.9% in the last four quarters. It carries a Zacks Rank #2. Year to date, the stock has gained 20.5%. The company has expected earnings growth of 9.7% for the current year. The Zacks Consensus Estimate for the current year has improved 2.6% over the past 60 days.
NIKE Inc. NKE: The company delivered average positive earnings surprise of 15.6% in the last four quarters. It carries a Zacks Rank #2. Year to date, the stock has gained 14.9%. The company has expected earnings growth of 8.7% for the current year. The Zacks Consensus Estimate for the current year has improved 0.4% over the past 60 days.
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