A Look At Dow ETF Ahead Of Q4 Earnings

After logging the biggest annual losses since 2008, the Dow Jones made a comeback at the start of 2019. The blue-chip index gained 3% in the first two weeks of this year on the back of robust December job data and Powell’s comment that the Fed is not in a hurry to raise rates this year. Signs of progress in U.S.-China trade talks also boosted demand for riskier assets. Additionally, Fed minutes, which indicated caution on future interest rate hikes, helped to boost sentiment.

As such, its proxy version, SPDR Dow Jones Industrial Average ETF (DIA - Free Report), is in the spotlight heading into the earnings season.

DIA in Focus

This is one of the largest and most popular ETFs in the large-cap space with AUM of more than $20.5 billion and average daily volume of 4.9 million shares. Holding 30 blue chip stocks, the fund is widely spread across components with each holding less than 10% share. Industrials (22.3%), information technology (17.2%), financials (14%), healthcare (13.9%) and consumer discretionary (12.3%) are the top five sectors. DIA charges 17 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. 

Let’s delve into the Q4 earnings picture that will likely set up the movement of the fund in the coming days.

Q4 Earnings Trends

Earnings for the S&P 500 Index are expected to grow 10.5% year over year on 5.3% higher revenues. This represents a notable deceleration from 25% earnings growth in the first three quarters of 2018.

In fact, the magnitude of earnings revision has moved down from 15.9% at the start of the quarter, representing higher estimate cuts than the preceding four quarters. The downtrend can be due to an uncertain global economic backdrop that compounded the market’s pre-existing worries about Fed policy and global trade.

Nearly one-fourth of the blue-chip firms are expected to announce their results this week and in the next. JPMorgan Chase (JPM - Free Report) is expected to release its results on Jul 15.

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