5 Stocks That Led Dow ETF to New Heights

The Dow Jones Industrial Average rallied to new highs on a solid start to third-quarter earnings. The benchmark topped 43,000 for the first time early this week and is up 14.3% so far this year. 

SPDR Dow Jones Industrial Average ETF DIA, which tracks the Dow Jones Index, has gained 15% this year. While most of the stocks in the ETF portfolio have been rising over the past week, we have highlighted five that have been leading the way higher. These are JPMorgan Chase & Co. JPM, The Goldman Sachs Group Inc. GS, Honeywell International Inc. HON, McDonald’s MCD and Apple Inc. AAPL.

The third-quarter earnings season is off to a strong start, with companies beating estimates and providing a reassuring comment on underlying economic trends. Total earnings for the 48 S&P 500 members that have reported third-quarter results so far are up 5.2% on 4.9% higher revenues, with 81.3% beating EPS estimates and 72.9% beating revenue estimates. This is a better beat ratio than the group of companies seen in other recent periods (read: 5 Sector ETFs to Bet on This Earnings Season).

Additionally, the latest blockbuster jobs and inflation report renewed investors’ confidence in the economy's health. The jobs data showed the biggest jump in six months in September, a fall in the unemployment rate and a solid wage increase, all pointing to a resilient economy. The United States added 254,000 jobs last month, up from a revised 159,000 in August, and unemployment dipped to 4.1% from 4.2% in August. Meanwhile, inflation cooled down to 2.4% in September, down from 2.5% recorded in August and in line with market expectations of 2.3%-2.4%. The inflation rate peaked at a 41-year high of 8.9% in June 2022.

Further, the Fed rate cut cycle benefited the stocks. Lower rates primarily benefit cyclical sectors like industrials, financials and consumer discretionary. Being highly exposed to cyclical sectors, the blue-chip index is set to outperform from this trend. Lower rates generally lead to reduced borrowing costs for mortgages, credit cards and other consumer and business loans. This helps businesses to expand their operations more easily, resulting in increased profitability. This, in turn, stimulates economic growth and boosts the stock market.

DIA in Focus

SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with an AUM of $37 billion and an average daily volume of 3 million shares. It tracks the Dow Jones Industrial Average Index, holding 30 stocks in its basket, with each making up for less than 8.6% share. Financials (23.7%), information technology (19.2%), healthcare (17.8%), consumer discretionary (15.3%) and industrials (13.7%) are the top five sectors. 

SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 5 Sector ETFs to Bet on This Earnings Season).  

Best-Performing Stocks of DIA

JPMorgan is one of the biggest global banks, with assets worth 4.14 trillion and stockholders’ equity worth $340.6 billion as of June 30, 2024. The stock has gained 5.5% in a week and makes up for 3.4% in the DIA portfolio. It has an expected earnings growth rate of 7.9% for this year. JPMorgan currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Goldman is a leading global financial holding company that provides IB, securities, investment management and consumer banking services to a diversified client base. The stock has gained 5% over the past week and has an estimated earnings growth rate of 55.2% for this year. Goldman accounts for an 8% share in DIA’s portfolio and has a Zacks Rank #3. 

Honeywell International is a global diversified technology and manufacturing company, with a wide range of products and services. Its diversified portfolio of solutions serves customers globally with aerospace products and services, energy-efficient products and solutions for businesses, and process technology, specialty chemicals, electronic and advanced materials for refining and petrochemicals. HON has risen 5% this year over the past week and makes up for 3.3% of DIA portfolio. Honeywell has an expected earnings growth rate of 10.3% for this year and has a Zacks Rank #4 (Sell).

McDonald’s is a leading fast-food chain that currently operates more than 39,000 restaurants in more than 100 countries. The company mainly operates and franchises quick-service restaurants (QSRs) under the McDonald’s brand. The stock has gained 3.8% over the past week and accounts for a 4.8% share in the DIA basket. McDonald’s is expected to see an earnings decline of 2% for this year and has a Zacks Rank #3.

Apple designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The stock has gained 3.6% in a week and makes up for 3.6% in the DIA portfolio. It has an expected earnings growth rate of 13.4% for the fiscal year (ending Sept. 2025). Apple currently has a Zacks Rank #3.

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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM): Free Stock Analysis Report
 
Apple Inc. (AAPL): Free Stock Analysis Report
 
Honeywell International Inc. (HON): Free Stock Analysis Report
 
McDonald's Corporation (MCD): Free Stock Analysis Report
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports

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