Wall Street has been facing tough times this year with all the major indices in deep red. The decline was trigerred by worries about Russia’s invasion of Ukraine, an energy crisis in Europe and the end of easy money policy globally. Both the S&P 500 and the tech-heavy Nasdaq Index are in bear market, losing 23% and 31%, respectively, while the Dow Jones in the only of the three main indexes not to have bear market status.
The blue-chip index is down 18.6% year to date. SPDR Dow Jones Industrial Average ETF DIA, the proxy version of the Dow Jones Index, has plunged about 17.4%. While most of the stocks in DIA’s portfolio are in red, four stocks have been standing tall so far this year. These include Chevron CVX, Merck & Co. MRK, UnitedHealth Group Inc. UNH and Amgen AMGN.
The renewed selling pressure came last week after Fed Chair Jerome Powell raised interest rates by another 75 bps. This marks the third consecutive rate hike of 0.75% and pushed the benchmark interest rate to 3.0-3.25%, the highest level since 2008. The central bank also signaled that additional large rate hikes were likely at upcoming meetings as it combats inflation that remains near a 40-year high (read: ETFs That Won After Fed Rate Hike).
Fed officials now expect the federal funds rate at a range of 4.25% to 4.5%, a full percentage point above the 3.25% to 3.5% projected in June to end 2022. This means that the central bank could approve another three-quarter point hike at its November meeting and then a half-point rate rise in December. Economists warned that the rapid tightening would hurt the labor and housing markets, thereby pushing the economy into recession and impacting the stock market.
Let’s take a closer look at the fundamentals of DIA.
DIA in Focus
SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space with AUM of $26.3 billion and an average daily volume of 3 million shares. Holding 30 blue chip stocks, the fund is widely spread across components with each holding less than 11.4% share. Healthcare (21.9%), information technology (20.2%), financials (15.6%), consumer discretionary (13.5%) and industrials (13.1%) are the top five sectors. DIA charges 16 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (see: all the Large Cap Blend ETFs here).
Below we have highlighted the above-mentioned four stocks in the ETF.
Best Stocks of SPY
Chevron is one of the largest publicly traded oil and gas companies in the world, with operations that span almost every corner of the globe. The stock has soared 23.4% so far this year and accounts for a 3.4% share in the ETF.
Chevron has an estimated earnings growth rate of 125.9% for this year. It has a Zacks Rank #2 and VGM Score of A. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Merck operates as a healthcare company worldwide. It makes up for a 1.9% share in the fund’s basket and gained 13.2% so far this year.
Merck has an estimated earnings growth rate of 21.8% for this year. The stock carries a Zacks Rank #3 and has a VGM Score of A.
UnitedHealth provides a wide range of health care products and services, such as health maintenance organizations, point of service plans, preferred provider organizations, and managed fee-for-service programs. The stock is up 2.3% this year and accounts for 11.4% in the fund’s basket.
UnitedHealth has an estimated earnings growth rate of 14.9% for this year and a Zacks Rank #3. It carries a solid VGM Score of B (read: 5 Defensive ETFs to Play as Recession Fears Grow).
Amgen is one of the biggest biotech companies in the world, with a strong presence in the oncology/hematology, cardiovascular disease, neuroscience, inflammation, bone health and nephrology and neuroscience markets. The stock has gained about 1% and accounts for 5% in the fund’s basket.
Amgen is expected to see earnings growth of 2% for this year and has a Zacks Rank #3. It has a solid VGM Score of B.
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Chevron Corporation (CVX) : Free Stock Analysis Report
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
Amgen Inc. (AMGN) : Free Stock Analysis Report
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
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