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Dow Reclaims 40,000 Mark, Surpasses Major Indices: ETFs to Tap
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The Dow Jones Industrial Average has finally started to catch up with the rally of 2024 on growing expectations of Fed rates cut this year. It reclaimed the 40,000 milestone for the first time since May, outperforming the other two major indices last week. The blue-chip index gained 1.6% compared with 0.9% and 0.2% increase of the S&P 500 and Nasdaq Composite Index, respectively.
Investors seeking to participate in the Dow Jones rally can consider SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , iShares Dow Jones U.S. ETF (IYY - Free Report) , Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) , ProShares Ultra Dow30 ETF (DDM - Free Report) and ProShares UltraPro Dow30 (UDOW - Free Report) .
Behind the Sudden Rally
The latest encouraging inflation data showing the first monthly drop since 2020 and the slowest annual price gain since March 2021 has deepened the market’s confidence that the Fed would begin cutting interest rates in September. According to data from the CME Group, markets are now pricing in a roughly 89% chance that the Fed will begin to cut rates at its September meeting, up from 75% a day prior.
This has led to a huge sell-off in the hot technology sector and a move toward the laggards that could benefit from falling rates, like industrials and small caps. Being highly exposed to cyclical sectors, the blue-chip index is the biggest beneficiary of the market rotation. Home Depot (HD), Caterpillar (CAT) and Amgen (AMGN) provided the biggest boost to the Dow Jones index (read: Should Investors Diversify From Technology? ETFs to Consider).
Further, earnings optimism is adding to the strength. The second-quarter 2024 earnings season kicked off last week with reports from JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC). The overall picture for this reporting cycle is one of continued resilience and a steadily improving outlook with a favorable revision trend.
Total S&P 500 earnings are expected to be up 8.8% from the year-ago period on 4.4% higher revenues, per the latest Earnings Trends. This will be the highest earnings growth rate since the 9.9% growth rate in the first quarter of 2022. Though estimates have steadily come down since the start of the quarter, the magnitude of declines is far smaller relative to the comparable periods of other recent quarters.
ETFs to Bet On
SPDR Dow Jones Industrial Average ETF (DIA - Free Report)
SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with an AUM of $33.5 billion and an average daily volume of 3 million shares. Holding 30 blue-chip stocks, the fund is widely spread across components, with each having less than 8.5% share. Financials (23.1%), information technology (19.7%), healthcare (18.3%), consumer discretionary (14.5%) and industrials (13.8%) 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 (read: Will Q2 Earnings Power Dow ETFs?).
iShares Dow Jones U.S. ETF tracks the Dow Jones U.S. Index, holding 1074 stocks in its basket, with none accounting for more than 6.5% of the assets. Information technology takes the largest share at 31.7%, while financials, healthcare and consumer discretionary round off the next spots with double-digit exposure each.
iShares Dow Jones U.S. ETF has amassed $2 million in its asset base while trading in an average daily volume of 19,000 shares. It charges 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
Invesco Dow Jones Industrial Average Dividend ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 29 stocks in its basket, with none accounting for more than 10.3% of the assets.
Invesco Dow Jones Industrial Average Dividend ETF has been able to manage assets worth $292.7 million while trading in a volume of 22,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold).
Leveraged Play: A Short-Term Win
Investors willing to take an extra risk could go for leveraged ETFs. These funds create a leveraged (2X or 3X) long position in the underlying index through the use of swaps, options, future contracts and other financial instruments. While these funds provide outsized returns in a short span, they could lead to huge losses compared to traditional funds in fluctuating or seesaw markets.
ProShares Ultra Dow30 ETF provides twice (2X) the return of the Dow Jones Industrial Average. It has AUM of $376.3 million and trades in a good volume of around 221,000 shares on average. The product charges 95 bps in annual fees (see: all the Leveraged Equity ETFs here).
ProShares UltraPro Dow30 also tracks the Dow Jones Industrial Average, offering three times (3X) exposure to the index. It has amassed $655.3 million in its asset base and trades in a solid average daily volume of 2.5 million shares. The expense ratio comes in at 0.95%.
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Dow Reclaims 40,000 Mark, Surpasses Major Indices: ETFs to Tap
The Dow Jones Industrial Average has finally started to catch up with the rally of 2024 on growing expectations of Fed rates cut this year. It reclaimed the 40,000 milestone for the first time since May, outperforming the other two major indices last week. The blue-chip index gained 1.6% compared with 0.9% and 0.2% increase of the S&P 500 and Nasdaq Composite Index, respectively.
Investors seeking to participate in the Dow Jones rally can consider SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , iShares Dow Jones U.S. ETF (IYY - Free Report) , Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) , ProShares Ultra Dow30 ETF (DDM - Free Report) and ProShares UltraPro Dow30 (UDOW - Free Report) .
Behind the Sudden Rally
The latest encouraging inflation data showing the first monthly drop since 2020 and the slowest annual price gain since March 2021 has deepened the market’s confidence that the Fed would begin cutting interest rates in September. According to data from the CME Group, markets are now pricing in a roughly 89% chance that the Fed will begin to cut rates at its September meeting, up from 75% a day prior.
This has led to a huge sell-off in the hot technology sector and a move toward the laggards that could benefit from falling rates, like industrials and small caps. Being highly exposed to cyclical sectors, the blue-chip index is the biggest beneficiary of the market rotation. Home Depot (HD), Caterpillar (CAT) and Amgen (AMGN) provided the biggest boost to the Dow Jones index (read: Should Investors Diversify From Technology? ETFs to Consider).
Further, earnings optimism is adding to the strength. The second-quarter 2024 earnings season kicked off last week with reports from JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC). The overall picture for this reporting cycle is one of continued resilience and a steadily improving outlook with a favorable revision trend.
Total S&P 500 earnings are expected to be up 8.8% from the year-ago period on 4.4% higher revenues, per the latest Earnings Trends. This will be the highest earnings growth rate since the 9.9% growth rate in the first quarter of 2022. Though estimates have steadily come down since the start of the quarter, the magnitude of declines is far smaller relative to the comparable periods of other recent quarters.
ETFs to Bet On
SPDR Dow Jones Industrial Average ETF (DIA - Free Report)
SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with an AUM of $33.5 billion and an average daily volume of 3 million shares. Holding 30 blue-chip stocks, the fund is widely spread across components, with each having less than 8.5% share. Financials (23.1%), information technology (19.7%), healthcare (18.3%), consumer discretionary (14.5%) and industrials (13.8%) 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 (read: Will Q2 Earnings Power Dow ETFs?).
iShares Dow Jones U.S. ETF (IYY - Free Report)
iShares Dow Jones U.S. ETF tracks the Dow Jones U.S. Index, holding 1074 stocks in its basket, with none accounting for more than 6.5% of the assets. Information technology takes the largest share at 31.7%, while financials, healthcare and consumer discretionary round off the next spots with double-digit exposure each.
iShares Dow Jones U.S. ETF has amassed $2 million in its asset base while trading in an average daily volume of 19,000 shares. It charges 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
Invesco Dow Jones Industrial Average Dividend ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 29 stocks in its basket, with none accounting for more than 10.3% of the assets.
Invesco Dow Jones Industrial Average Dividend ETF has been able to manage assets worth $292.7 million while trading in a volume of 22,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold).
Leveraged Play: A Short-Term Win
Investors willing to take an extra risk could go for leveraged ETFs. These funds create a leveraged (2X or 3X) long position in the underlying index through the use of swaps, options, future contracts and other financial instruments. While these funds provide outsized returns in a short span, they could lead to huge losses compared to traditional funds in fluctuating or seesaw markets.
ProShares Ultra Dow30 ETF (DDM - Free Report)
ProShares Ultra Dow30 ETF provides twice (2X) the return of the Dow Jones Industrial Average. It has AUM of $376.3 million and trades in a good volume of around 221,000 shares on average. The product charges 95 bps in annual fees (see: all the Leveraged Equity ETFs here).
ProShares UltraPro Dow30 (UDOW - Free Report)
ProShares UltraPro Dow30 also tracks the Dow Jones Industrial Average, offering three times (3X) exposure to the index. It has amassed $655.3 million in its asset base and trades in a solid average daily volume of 2.5 million shares. The expense ratio comes in at 0.95%.