Dow Jones ETF Outperforming: Will the Rally Continue?

The Dow Jones Industrial Average has been hitting new record highs in recent sessions and is outperforming the other two major indices amid the weakness in the tech sector. Rate cut optimism, sector rotation and strong corporate earnings or actions are driving the blue-chip rally.That being said, SPDR Dow Jones Industrial Average ETF DIA, which tracks the Dow Jones, has risen 2.1% over the past week while the Vanguard S&P 500 ETF VOO and Invesco QQQ Trust Series QQQ gained 1.2% and 0.7%, respectively (read: Dow Jones ETF Hits New 52-Week High).Sector RotationInvestors are shifting out of high-flying tech and AI plays and moving into beaten-down and undervalued sectors like industrials, retail, financials and real estate. This shift has driven the rally in the Dow Jones Index.Additionally, the tech sector has been struggling in recent weeks in the wake of uncertainty surrounding the Trump administration’s trade policies. The weakness in the tech sector has led investors to move to value-oriented stocks.Strong Home Depot & UnitedHealth MomentumTwo heavy components in the Dow Jones — Home Depot (HD) and UnitedHealth (UNH) — have pushed the index to record highs. Home Depot surged on its steady guidance despite the earnings miss. Meanwhile, UnitedHealth soared last Friday after Berkshire Hathaway disclosed its major stake in the company, valued at approximately $1.6 billion or around 5 million shares in its second-quarter filings (read: Insights Into 13F Filings: ETFs to Invest in Like Billionaires).Growing Rate Cut BetsThe blue-chip index has been benefiting from growing market expectations that the Fed will begin cutting interest rates, possibly starting in September, with futures pricing in two 25-bps reductions. Lower rates benefit cyclical sectors like industrials, financials and consumer discretionary the most. It reduces 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. Notably, Dow Jones is highly exposed to cyclical sectors and thus will be the biggest beneficiary of potential rate cuts out of the three major indices.Stable & Value-OrientedThe blue-chip index consists of typically less risky stocks. These companies are more established and provide a broader range of products or services, offering some safety in case of an economic slowdown or political issues. Most of the stocks in the Dow Jones Index have a tilt toward value stocks. Value stocks seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with their growth and blend counterparts. Further, these stocks are less susceptible to trending markets, and their dividend payouts offer safety in times of market turbulence. Let’s take a closer look at the fundamentals of DIA.DIA in FocusWith AUM of $39.2 billion, DIA holds 30 stocks in its basket, with each security holding no more than a 10% share. The fund is widely spread across sectors, with financials, information technology, consumer discretionary, industrials and healthcare being the top five. It charges 16 bps in fees per year from investors and trades in heavy volume of around 4 million shares a day on average. The fund has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. Boost Your Portfolio with Our Top ETF InsightsZacks' exclusive Fund Newsletter delivers actionable information, top news and analysis, as well as top-performing ETFs, straight to your inbox every week.Don’t miss out on this valuable resource. It’s free!Get it now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Invesco QQQ (QQQ): ETF Research Reports SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports Vanguard S&P 500 ETF (VOO): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks