U.S. stocks are headed for their worst drop since the 2008 financial crisis, snapping a three-year winning streak. Though all three major bourses are in deep red, the Dow Jones fared as the best index, declining 8.6%. The S&P 500 and tech-heavy Nasdaq Composite Index tumbled 19.2% and 33%, respectively.
While less than half of the stocks in the blue-chip index are in green, five have gained in double digits and remain the hottest throughout the year. These include Chevron CVX, Merck & Co. MRK, The Travelers Companies Inc. TRV, Amgen AMGN and Caterpillar CAT.
Russia’s invasion of Ukraine, aggressive Fed rate hikes and global growth concerns have roiled the stock market badly. Additionally, a resurgence of COVID-19 cases in China has slowed down economic activities across the country.
The Fed has been on an aggressive tightening spree for more than decades. Fed Chair Jerome Powell raised interest rates for the seventh time this year, taking the benchmark rate to the range of 3.75% and 4.00% — the highest level since 2008. The increase in interest rates has made borrowing expensive, pushed up the cost of buying a new car or house, increased the cost of carrying credit card debt and thus heightened the risk of a recession.
However, the latest bouts of data, including easing consumer prices, rising consumer confidence, a solid job report, and strong manufacturing activity, suggest that a large part of the economy remains resilient. Oil prices have been rising on tightening supply and higher demand conditions.
The outperformance of the blue-chip index came as it has significant exposure to cyclical sectors like energy, industrials and financials. These sectors have performed well this year. Energy is the top sector of 2022 driven by higher oil price, industrials has gained strength on improving manufacturing and industrial activities, while the financial sector got a boost from rate hikes.
Best Stocks of Dow
Chevron is one of the largest publicly traded oil and gas companies in the world, with operations that span almost every corner of the globe. The stock has soared 52% this year.
Chevron has an estimated earnings growth rate of 135.3% for this year. It has a Zacks Rank #3 (Hold) and VGM Score of A.
Merck operates as a healthcare company worldwide. It boasts more than six blockbuster drugs in its portfolio, with PD-L1 inhibitor, Keytruda, approved for several types of cancer, alone accounting for around 40% of its pharmaceutical sales. The stock has climbed 44.6% this year.
Merck has an estimated earnings growth rate of 22.6% for this year. The stock carries a Zacks Rank #3 and has a VGM Score of A.
Travelers, through its subsidiaries, is principally engaged in providing a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States. and select international markets. The stock has gained about 21%.
Travelers is expected to see earnings growth of 11.4% for this year and has a Zacks Rank #3. It has a solid VGM Score of B.
Amgen is one of the biggest biotech companies in the world, with a strong presence in the oncology/hematology, cardiovascular disease, neuroscience, inflammation, bone health and nephrology and neuroscience markets. The stock has risen about 17%.
Amgen is expected to see earnings growth of 3% for this year and has a Zacks Rank #3. It has a solid Value Score of B.
Caterpillar, known for its iconic yellow machines, is the largest global construction and mining equipment manufacturer. Given that it serves a gamut of sectors — infrastructure, construction, mining, oil & gas and transportation — the company is considered a bellwether of the global economy. Caterpillar is up 6.2% this year.
Caterpillar has an expected earnings growth rate of 28% for this year. It carries a Zacks Rank #2 (Buy) and a VGM Score of B. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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