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Dow Posts Longest Winning Run Since November: 5 Top Picks

Zacks

Wall Street went through a rough patch in 2018 after providing fabulous returns in 2017. The Dow 30 – one of the three major stock indexes of the U.S. market – finished in the red in 2018. The blue-chip index witnessed extreme volatility on account of uncertainty over the Fed’s future monetary stance, conflicting news related to trade war between the United States and China, and concerns of a global economic slowdown.

However, the Dow – commenced 2019 on a brighter note. Positive developments on trade war front and Fed’s monetary stance are likely to boost investor sentiment in the near-term resulting in further consolidation of the index. Consequently, it will be a good idea to add Dow stocks with a favorable Zacks Rank to your portfolios at the moment.

Dow Starts 2019 on a Positive Note

Last year was severely disappointing for the Dow. The index plunged 5.6% recording its worst ever yearly performance since 2008. The blue-chip index faced extreme volatility throughout the year. The Dow has swung more than 1,000 points in a single session only eight times in its history, five of which happened in 2018 alone.

The Dow starts 2019 with strong momentum. The index is up 2% in the first five sessions of trading in 2019. The blue-chip index ended in positive territory in the last three trading sessions, marking its longest winning run since November 2018. In those three days, the index gained 4.8% or 1,101.23 points.

Resumption of US-China Trade Talks

The two-day long meeting between high level delegations of the United States and China which resumed on Jan 7, has been extended for one more day. Although no broad-based agreement has appeared so far, China has already approved five genetically-modified crops for import that will mostly benefit U.S. agricultural exports.

Notably, several economists have expressed concerns of a global economic slowdown in 2019 owing to lingering trade conflict between these two largest trading nations of the world.

Reuters reported that the Chinese foreign ministry confirmed on Monday that both sides have expressed the desire to work together in order to find an amicable solution. The foreign ministry also stated that China wants to resolve trade disputes with the United States on an equal footing.

Further, U.S. Commerce Secretary Wilbur Ross said that he is very hopeful regarding the trade conflict resolution this time around. On Jan 8, President Trump tweeted that trade talks with China were going well.

Powell Signals Dovish Monetary Stance by the Fed

On Jan 4, at the American Economics Association meeting in Atlanta, Fed Chairman Jerome Powell said that the Fed will be closely monitoring the economy’s performance in 2019 before taking any rate hike decisions. The central bank will adjust interest rate if it witnesses any sort of unexpected fluctuations in the U.S. economy.

The Fed will also reconsider its balance sheet reduction policy in order to keep interest rate market friendly. Notably, uncertainly related to the Fed’s monetary stance in 2019 resulted into extreme market volatility in the last three months.

Our Top Picks

At this stage, it will be a prudent move to invest in Dow 30 stocks. Each of our picks has a Zacks Rank #2 (Buy) and provided better returns than the index in the last three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below depicts price performance of our five picks in the last three months.


The Boeing Co. BA: The company recorded positive earnings surprise of 28% in the last four quarters. It has expected earnings growth of 20.3% for current year. The Zacks Consensus Estimate for the current year has improved by 0.5% over the last 60 days.

Merck & Co. Inc. MRK: The company recorded positive earnings surprise of 4% in the last four quarters. It has expected earnings growth of 8.9% for current year. The Zacks Consensus Estimate for the current year has improved by 0.2% over the last 60 days.

Walmart Inc. WMT: The company recorded positive earnings surprise of 3% in the last four quarters. It has expected earnings growth of 9.3% for current year. The Zacks Consensus Estimate for the current year has improved by 0.4% over the last 60 days.

UnitedHealth Group Inc. UNH: The company recorded positive earnings surprise of 3.7% in the last four quarters. It has expected earnings growth of 14.1% for current year. The Zacks Consensus Estimate for the current year has improved by 0.2% over the last 60 days.

The Home Depot Inc. HD: The company recorded positive earnings surprise of 5.8% in the last four quarters. It has expected earnings growth of 31.5% for current year. The Zacks Consensus Estimate for the current year has improved by 2.6% over the last 60 days.

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