The Wall Street had a sizzling start to 2018 as Trump's tax overhaul bolstered the optimism over strong corporate earnings and an improving economy. With the Q4 earnings season underway, investors are betting that the new tax legislation will result in big savings for the corporations, giving a boost to earnings.
The Dow Jones Industrial Average has been the biggest beneficiary of the Trump era and thus, its proxy version, SPDR Dow Jones Industrial Average ETF DIA, is in the spotlight. After climbing 25.1% last year, the Dow Jones soared another 2.3% in the initial days of trading.
DIA in Focus
This is one of the largest and most-popular ETFs in the large-cap space with AUM of over $23.6 billion and average daily volume of 2.8 million shares. Holding 30 blue chip stocks, the fund is widely spread across components with none holding more than 8.6% share. Industrials (23.8%), information technology (17.1%), financials (16.2%), consumer discretionary (14.7%) and healthcare (12.6%) 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
Total Q4 earnings are expected to be up 8.8% from the same period last year on 7% higher revenues. This is higher than the Q3 earnings growth of 6.7% on 5.9% revenue growth. Additionally, the revision trend has been favorable with earnings estimates holding up better relative to other comparable periods. The earnings estimates for Q4 have moved up 2 percentage points from 8.6% at the start of the period.
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 Jan 12.
UnitedHealth Group (UNH – Free Report) is scheduled to report on Jan 16, Goldman (GS – Free Report) on Jan 17, International Business Machines (IBM – Free Report) and American Express (AXP – Free Report) and will report on Jan 18 each. Other companies like Procter & Gamble Company (PG – Free Report) and Johnson & Johnson (JNJ – Free Report) will come up with their reports on Jan 23, while General Electric (GE – Free Report) have their earnings release slated for Jan 24.
