Dow Hits 30K for First Time: 7 Stocks Driving the ETF Rally
Wall Street seemed super-excited as the Dow Jones reached 30,000 for the first time in history on Nov 24 while the S&P 500, the Nasdaq and the Russell 2000 also rallied. In fact, the Dow Jones industrial average — the laggard among the trio this year — had turned positive for 2020 on Aug 28, having gained about 0.6%.
The blue-chip 30-stock index then managed quite a leg-up and added about 7.6% in the past three months (as of Nov 24, 2020). For the year so far, the index is up about 3.7% versus 10.7% gains in the S&P 500 and a jump of 32.4% in the Nasdaq.
Let’s delve into what drove the recent rally.
Vaccine News
Vaccine hopeshave taken Wall Street to new highs this month. In early November, Pfizer Inc. PFE and BioNTech SE (BNTX) came up with encouraging updates on their coronavirus vaccine candidate, BNT162b2. The candidate finally reflected a vaccine efficacy rate of 95% last week. Moderna (MRNA) also said that its vaccine was more than 94% effective in preventing the virus.
And the third good news came on Nov 23 as AstraZeneca (AZN) said its vaccine, developed in collaboration with the University of Oxford, showed an average 70% effectiveness. Sanofi (SNY) and GlaxoSmithKline's (GSK) as well as Johnson & Johnson(JNJ) are also working hard in the COVID-19 vaccine field (read: ETFs to Play as Vaccine News Looks to Outdo Virus Fear).
Expectations of Upbeat Holiday Sales
NRF noted that the retail sector has witnessed a V-shaped recovery as aggregate retail sales have grown both sequentially and year over year each month since June. For the first 10 months of this year, retail sales were up 6.4% versus the first 10 months of 2019, per NRF. Overall, the retail sector is expected to log a “strong finish” to 2020 despite COVID-19.
Stimulus Hopes
Treasury Secretary Steven Mnuchin also rekindled stimulus hopes. On Nov 19, Mnuchin “asked the Federal Reserve to shut down five emergency COVID-19 relief facilities and return $455 billion of unused funds, a move opposed by Fed Chairman Jerome Powell.”
Notably, in March, the Congress had approved about $500 billion to enact a variety of emergency lending facilities through the Fed and guarantee loans. Out of this, only a trivial portion of the funds — $25 billion — was used. Now Mnuchin wants to discuss a targeted stimulus package with the Democrats. Probably the unused funds will help them to come up with a stimulus package (read: Why Is This the Right Time to Bet on Small-Cap Value ETFs?).
Oil Rally
Furthermore, it has been noticed lately that the Dow Jones shares a deep relationship with oil price movement. Though the energy sector rally spreads optimism over the broader market as a whole, in most cases, on a particular day of oil surge, the rise in the Dow Jones is steeper than that of the S&P 500, or vice versa. Last week, WTI crude fund United States Oil Fund, LP USO added about 6.7%. The WTI ETF was up 4.4% on Nov 24.
Dow Jones ETF DIA in Focus
Dow Jones Industrial Average ETF Trust DIA is one of the largest and most-popular ETFs in the large-cap space with AUM of $24.7 billion and average daily volume of 4 million shares. Holding 30 blue chip stocks, the fund is widely spread across components with each holding less than 7.46% share.
Information technology (22.2%), healthcare (17.4%), industrials (17%), consumer discretionary (13.8%), and financials (13.3%) and are the top five sectors. DIA charges 16 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Below we highlight seven stocks that helped the Dow Jones in attaining the 30K milestone on Nov 24.
Chevron Corp CVX: Weight in Dow (2.02%), Stock Up 5% on Nov 24
JPMorgan Chase & Co (JPM): Weight in Dow (2.6%), Stock Up 4.6% on Nov 24
Goldman Sachs Group Inc. GS: Weight in Dow (5.08%), Stock Up 3.8% on Nov 24
Walt Disney DIS: Weight in Dow (3.24%), Stock Up 3.8% on Nov 24
American Express Co AXP: Weight in Dow (2.58%), Stock Up 3.7% on Nov 24
International Business Machines Corp IBM: Weight in Dow (2.67%), Stock Up 3.61% on Nov 24
Boeing Co BA: Weight in Dow (4.70%), Stock Up 3.29% on Nov 24
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International Business Machines Corporation (IBM) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
Pfizer Inc. (PFE) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
The Walt Disney Company (DIS) : Free Stock Analysis Report
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
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