Dow Jones Stages Solid Comeback: 5 Top-Ranked Stocks To Buy

Wall Street went into a tailspin in the final days of February on the coronavirus scare, resulting in the Dow Jones Industrial Average logging its worst one-day slump in history. However, the disaster was short lived, as the blue-chip index recorded the biggest one-day gain since 2009 at the beginning of March. The Dow Jones gained about 5.1% on Mar 2.

Hopes for a “coordinated policy response by central banks” encouraged investors to buy the dip and helped the indexes bounce back. Not only the Dow Jones, the S&P 500 and the Nasdaq also gained a stellar 4.6% and 4.5% on Mar 2, respectively.

Investors should note that at the current level, according to CME FedWatch tool, there is a 100% probability of monetary-policy easing by 50 basis points in the Fed’s mid-March meeting. Apart from the Fed, several other central banks (like Japan) may pursue policy easing as well. Australia has already cut rates. The People's Bank of China has been supporting easy banking rules.

Here's Why Dow Jones Gained the Most

The Dow Jones has been offering cheaper valuation than its other two cousins — the S&P 500 and the Nasdaq. The trailing 12-month P/E of the Dow Jones Industrial Average is currently 20.76x versus about 22.75x offered by the S&P 500 and about 25.63x of the Nasdaq 100. Thus, in a day of a superb market rally, the Dow Jones had an easy chance to gain the most.

Notably, Boeing (NYSE:BA) has been a constant worry for the Dow Jones. Boeing holds 7.33% of the fund SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (TSXV:DIA) , securing the top spot. Therefore, the company’s performance matters a lot. The stock has been suffering extensively due to the 737 MAX jetliner crisis, with no hope for any near-term recovery. However, even Boeing’s shares gained 5.2% on Mar 2.

Then, the Dow Jones is normally considered the most trade-sensitive index in the U.S. market. With China battling the coronavirus outbreak, several cities on lockdown, and strict trade and travel restrictions, the Dow Jones had skidded the most. But now with China’s report for the new cases slowing down, the blue-chip index has every reason to win.

Furthermore, it has been noticed, lately, that the Dow Jones shares a close relationship with oil price movement. In most cases, on a particular day of oil surge, the spurt in the Dow Jones is steeper than that of the S&P 500, or vice versa. The likelihood of global central banks easing monetary policies would propel growth, in turn, spurring demand for oil. United States Oil Fund (NYSE:USO) LP USO rallied about 5% on Mar 2.

Against this backdrop, below we highlight a few top-ranked stocks under the Dow Jones that have solid potential to gain, if the policy-hope-induced rally sustains.

Stock Picks

Apple Inc. (NASDAQ:AAPL)

The iPhone marker was the top performer in the index on Mar 2, having appreciated 9.3%. The stock currently carries a Zacks Rank #2 (Buy) and belongs to a favorable Zacks industry (placed at the top 5% of 250+ industries). Continued momentum in the Services segment and a rebound in iPhone sales should drive the stock ahead. The stock has a Growth Score of B.

UnitedHealth Group Incorporated (NYSE:UNH)

This Zacks Rank #2 healthcare company comes from a favorable Zacks industry (top 21%). Upbeat earnings guidance, strength in both segments, UnitedHealthcare and Optum, and membership growth will benefit the stock ahead. The company’s low-premium coverage plan, Harmony, that depends on Optum doctors will likely help the company lower costs in the coming days. It was up 7.1% on Mar 2.

Microsoft Corporation (NASDAQ:MSFT)

This Zacks Rank #1 (Strong Buy) tech biggie hails from a favorable Zacks industry (top 23%). Though like Apple, Microsoft too issued a softer revenue guidance for the first quarter due to the coronavirus spread, many investors are seeing it as a buying opportunity. Solid opportunities in cloud, dominant position in the desktop PC market, robust presence in the gaming hardware market and ample cash make it a lucrative buy. Shares of the company rallied 6.7% on Mar 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Procter & Gamble Company (NYSE:PG)

This Zacks Rank #2 consumer staples giant comes from a favorable Zacks industry (top 21%). The company’s stellar second-quarter fiscal 2020 earnings mark the continuation of its positive surprise trend. An upbeat outlook, decent financial strength and the company’s positioning in a safe sector are other tailwinds. The stock offers a solid benchmark-beating yield of 2.6%. The stock gained 4.8% on Mar 2.

Intel Corporation (NASDAQ:INTC)

The world’s largest semiconductor company and primary supplier of microprocessors and chipsets is gradually reducing its dependence on the PC-centric business by moving into data-centric businesses — such as AI and autonomous driving. Business presence in such emerging areas makes it a Zacks #2 Ranked stock. It comes from a favorable Zacks industry (top 15%).

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