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Dow Jones Jumps 600 Points: Bet on 4 Momentum Stocks to Win Big

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Radhika Pujara
·6 min read
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The Dow Jones Industrial Average hit record high of 31,022.65 on Jan 6 in the intraday trading, up 631 points over close of 30,391.6 on Jan 5, coutesy of optimism regarding more stimulus. The Dow Jones eventually closed a tad bit lower at 30,829.4, up 1.44%.

Notably, the two victories of the Rev. Raphael Warnock and Jon Ossoff, both Democrats, has paved the way for Democrats to take control of the Senate as they now have secured a befitting 50 seats as the Republics.

Now, Vice President-elect Kamala Harris’ tie-breaker vote is expected to lay the foundation for Democrats to enact their legislative agenda and take control over both chambers of Congress and the White House.

Moreover, Senate Minority Leader Chuck Schumer’s issued a statement calling for boosting stimulus checks to $2,000, significantly higher than $600 bill passed in late December. Schumer announced the legislative proposals is “one of the first things we want to do.” This, in turn, renewed hopes of economic upturn and got reflected in investors’ bullish sentiments.

Furthermore, the bounce in U.S. 10-Year Treasury Yield that rose above 1% for the first time since March lows of 0.318%, drove finance and banking stocks up. Markedly, The Goldman Sachs Group, Inc. GS, JPMorgan Chase & Co. JPM and American Express Company AXP, gained 5.4%, 4.7% and 3.7%, in the intraday trading on Jan 6, as higher yields have a tendency to boost the net interest income which banks earn on their loan products. This, in turn, drove Dow Jones to new highs.

Optimism regarding strategic measures to revive economy, substantial increase in stimulus package and vaccine roll outs are expected aid the index to sustain its push.

Best 4 Dow Picks

We have selected five Dow stocks, which are poised to take the index for a ride in 2021. These stocks presently carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy) with a market capitalization of more than $50 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.

Moreover, each of the stocks carries a Momentum Score of A or B. Momentum investors seek to making the most of the upward trends in a stock's price or earnings. Per the Zacks proprietary methodology, stocks with these favorable combinations offer good investment opportunities.

Past Six-Month Price Performance

JPMorgan is expected to gain from expansion of business in new regions via branch openings. The bank aims to enter 15-20 new markets by the end of 2022, by opening roughly 400 new branches.

Moreover, synergies from buyout of InstaMed, strong mortgage banking business and focus on credit card operations are likely to continue supporting the bank's financials.

In fact, despite restrictions on capital deployments in a bid to conserve liquidity, the company’s cash position remains robust.

Also, following the Fed's second round of stress test and subsequent approval, the company will now resume repurchases in first-quarter 2021. For 2021, the company has share repurchase authorization worth up to $30 billion. Thus, given a solid liquidity position and earnings strength, JPMorgan is expected to continue enhancing shareholder value through efficient capital deployment activities.

The estimates for this Zacks Rank #1 company for 2021 earnings moved north by 6.9% to $9.43, over the last 30 days. The company has a Momentum Score of A and a market cap of $400.99 billion.

Goldman Sachs’ business diversification strategy is expected to help it sustain growth. The company’s cost management efforts continue to support bottom-line growth. Also, solid position in worldwide announced and completed M&As is poised to expand business avenues.

Moreover, with strong liquidity, Goldman Sachs carries a low credit risk in case of any economic downturn. Also, steady capital deployment activities and its prudent expense-reduction initiatives over the past few years remain encouraging.

Notably, the bank has been undertaking initiatives to boost the GS Bank’s business, which can be substantiated by its acquisition of the online deposit platform of GE Capital Bank in April 2016. It also rolled out a digital consumer lending platform — Marcus by Goldman Sachs. Additionally, the company is likely to benefit from its exposure to the fast-growing exchange-traded funds (ETF) market.

Additionally, estimates for this Zacks Rank #1 company has been witnessing upward revisions, of late. Over the last 30 days, the Zacks Consensus Estimate for 2021 earnings moved north by 3.5% to $25.40. The company has a Momentum Score of A and a market cap of $98.25 billion.

The Procter & Gamble Company’s PG products play a key role in meeting the daily health, hygiene and cleaning needs of consumers globally.

The increased consumer demand for its hand soaps, detergents and surface cleaning products following the pandemic outbreak remains encouraging on stay-at-home wave.

Also, strength across Fabric & Home Care, Health Care and Beauty segments, and organic sales growth strategies bode well for top-line growth. Moreover, upbeat view for fiscal 2021 is encouraging.

Additionally, the company is witnessing cost savings and efficiency improvements across all facets of business driven by its second five-year (fiscal 2017-2021) $10 billion productivity program, which augurs well.

The estimates for this Zacks Rank #2 company for fiscal 2021 earnings moved north by 2 cents to $5.57, over the last 30 days. The company has a Momentum Score of B and a market cap of $347.54 billion.

Merck & Co., Inc. MRK is poised to gain from strong demand for drugs like Keytruda, Lynparza and Bridion, which have been driving sales.

Growing clout of Keytruda in lung cancer and approval for other cancer indications deserve a special mention. Moreover, increasing sales of animal health and vaccine products remain core growth drivers.

Further, Merck has several pipeline candidates in advanced stages of development targeting multiple disease areas such as oncology, cardiovascular diseases, diabetes, infectious diseases, neurosciences, immunology diseases, and vaccines. The new products and approvals should bring in additional sales in 2021 and beyond.

The estimates for this Zacks Rank #2 company for 2021 sales indicate year-over-year growth of 7.4%. The company has a Momentum Score of B and a market cap of $208.42 billion.

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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
Procter & Gamble Company The (PG) : Free Stock Analysis Report
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