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5 Stocks That Powered Dow ETFs Over the Past Week

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The Dow Jones Industrial Average touched record highs in the past couple of days on expectations that the Fed would soon cut interest rates. The blue-chip index gained about 1% over the past week, outperforming the other indices. The S&P 500 gained 0.5% while the Nasdaq Composite Index shed 0.3% in the same time frame (read: Dow Jones Outperforms: 5 ETFs That You Can Bet On).

SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , which tracks the Dow Jones Index, has gained 0.9% in a week. While most of the stocks in the ETF portfolio have been rising, we have highlighted five that have been leading the way higher. These are American Express Company (AXP - Free Report) , The Travelers Companies Inc. (TRV - Free Report) , The Coca-Cola Company (KO - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) and Caterpillar (CAT - Free Report) .

Federal Reserve Chair Jerome Powell signaled that interest rate cuts are coming in September, citing easing inflation and a weakening job market. At the Fed’s annual symposium in Jackson Hole, Powell said, “the time has come” to lower borrowing costs in the light of a diminishing upside risk to inflation and moderating labor demand.” “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” The probability of a 25-bps rate cut stands at 69.5%, while that of a 50-bps cut is at 30.5%, according to the latest CME Group's FedWatch tool (read: 5 Sector ETFs Scaling New Highs on Fed Minutes).

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. 

Additionally, fading AI trades are taking a toll on the most loving technology sector, benefiting the undervalued cyclical sectors.

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 $35 billion and an average daily volume of 3.3 million shares. It tracks the Dow Jones Industrial Average Index, holding 30 stocks in its basket, with each making up for less than 9.4% share. Financials (23.4%), healthcare (19%), information technology (18.7%), consumer discretionary (14.7%) 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.  

Best-Performing Stocks of DIA

American Express is a diversified financial services company offering charge and credit payment card products and travel-related services worldwide. Shares of AXP have risen 3.6% over the past week. American Express earnings are expected to grow 17% this year. It makes up for a 4% share in the DIA portfolio. It has a Zacks Rank of 3 (Hold). 

Travelers is principally engaged in providing a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States and select international markets. The stock has gained 3.5% over the past week and accounts for a 3.1% share in the fund’s basket. Travelers has an expected earnings growth rate of 30.9% for this year. TRV stock has a Zacks Rank #3.

Coca-Cola is a beverage company that manufactures, markets and sells various nonalcoholic beverages worldwide. The company provides sparkling soft drinks, sparkling flavors; water, sports, coffee, and tea; juice, value-added dairy, and plant-based beverages; and other beverages. It has jumped nearly 1% over the past week and accounts for 2.8% in the fund’s basket. KO is expected to see earnings growth of 5.9% for this year and has a Zacks Rank #3 (read: ETFs to Tap as Consumer Sentiment Improves). 

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 2.6% in a week and makes up for 3.5% in DIA portfolio. It has an expected earnings growth rate of 3.4% for this year. JPMorgan currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Caterpillar, known for its iconic yellow machines, is the largest global construction and mining equipment manufacturer. The stock rose 2.4% over the past week and accounts for 5.6% in the fund’s basket. Caterpillar has an expected earnings growth rate of 3.1% for this year and has a Zacks Rank #3.

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