ETFs
ETFs will bet on the Dow’s longest winning streak in 2024 – May 9, 2024
The Dow Jones Industrial Average emerged relatively unscathed from the Fed’s latest official comments that higher rates were likely to remain for some time. The blue-chip index has advanced for six straight days, marking its longest winning streak this year and emerging more powerful than the other two major indexes, which cooled last session as Treasury yields rose. Notably, the index closed above 39,000 for the first time in five weeks.
Investors looking to participate in the Dow Jones rally may consider SPDR Dow Jones Industrial Average ETF (DIA – Free report) , iShares American Dow Jones 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 (UDOU – Free report) .
Fed officials reaffirmed their stance in favor of higher rates for a longer period of time. Policymaker Neel Kashkari signaled that rates were likely to remain at historic highs for some time. Boston Fed President Susan Collins also supported the idea, saying it would take longer “than previously thought” to bring inflation down. According to the CME’s latest FedWatch tool, markets are pricing in a first quarter point cut in September, with traders seeing a 71% chance of seeing two rate cuts by the end of 2024.
However, the latest market rally is mainly due to strong corporate profits and share buybacks. American companies are experiencing their best earnings season in almost two years. With 80% of S&P 500 companies having already reported their results, the index is on track to record a record. 5% growth of first quarter earnings per share by FactSet. This is the largest year-over-year increase since the second quarter of 2022 and higher than the 3.2% growth that analysts expected before the start of the season (read: Time to Tap Wall Street ETFs on Earnings Strength?).
Meanwhile, share buybacks have recently marked a strong comeback after the lull seen in 2023. Companies have announced share buybacks worth more than $383 billion over the past 13 weeks, up by 30% compared to last year and the highest since June 2018, according to a study. of Deutsche Bank. This indicates that U.S. businesses are optimistic about the U.S. economy.
Additionally, the Dow’s longest winning streak occurred following a broadening rally beyond the technology sector. Cyclical stocks, bank stocks and small-cap stocks have all been trending higher in recent sessions, fueling the blue-chip index.
ETFs to bet on
SPDR Dow Jones Industrial Average ETF (DIA – Free report)
The SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with $32.6 billion in assets under management and $4 million in average daily volume. actions. Holding 30 blue-chip stocks, the fund is widely distributed among several constituents, each holding less than 8.5% share. The financial (23%), information technology (18.8%), healthcare (18.2%), consumer discretionary (15%) and industrial (13.7%) sectors %) are the five main sectors.
The SPDR Dow Jones Industrial Average ETF charges 16 basis points in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with Medium Risk (read: 4 ETF Areas to Play Amid Slower Growth and Rising Inflation).
iShares US Dow Jones ETF (IYY – Free report)
The iShares Dow Jones US ETF tracks the Dow Jones US Index, holding 1,074 stocks in its basket, none of which represents more than 6.3% of assets. Information technology takes the largest share at 28.7%, while the financial, healthcare and consumer discretionary sectors round out the next spots with double-digit exposure each.
The iShares Dow Jones US ETF amassed $1.9 million in its asset base while trading an average daily volume of 27,000 shares. It charges 20 basis points in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium Risk Outlook.
Invesco Dow Jones Industrial Average Dividend ETF (DJD – Free report)
The Invesco Dow Jones Industrial Average Dividend ETF provides exposure to dividend-paying companies included in the Dow Jones Industrial Average based on their 12-month dividend yield over the preceding 12 months. He holds 29 stocks in his basket, none of which represents more than 10% of assets.
The Invesco Dow Jones Industrial Average Dividend ETF was able to manage assets worth $295.1 million while trading a volume of 21,000 shares per day on average. It charges 7 basis points in annual fees and has a Zacks ETF Rank #3.
Leverage play: a short-term victory
Investors willing to take on additional risk might opt for leveraged ETFs. These funds create a leveraged long position (2X or 3X) in the underlying index through the use of swaps, options, futures, and other financial instruments. Although these funds provide outsized returns over a short period of time, they could result in huge losses compared to traditional funds in fluctuating or seesawing markets.
ProShares Ultra Dow30 ETF (DDM – Free report)
The ProShares Ultra Dow30 ETF offers twice (2X) the return of the Dow Jones Industrial Average. It has $400.4 million in assets under management and trades a good volume of around 344,000 shares on average. The product charges a 95 basis point annual fee (see: all leveraged ETFs here).
ProShares UltraPro Dow30 (UDOU – Free report)
ProShares UltraPro Dow30 also tracks the Dow Jones Industrial Average but provides three times (3X) exposure to the index. It has amassed $597.6 million in assets and trades a solid average daily volume of 3 million shares. The spending rate is 0.95%.
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