The SPDR Dow Jones Industrial Average ETF (DIA) has underperformed the funds tracking the S&P 500 and the Nasdaq 100 indices. Its total return was 15.4%, worse than the S&P 500 and Nasdaq 100 ‘s 24% and 22%.
The Dow Jones has also lagged behind the two indices in the long term. For example, it has risen by about 400% since 2008, while the Nasdaq 100 and S&P 500 indices have jumped by 472% and 1,100%, respectively.
This performance is mostly because of how the fund is structured. According to its website, the financials segment is the biggest part of the fund followed by the technology sector. In contrast, the S&P 500 and Nasdaq 100 are mostly made up of technology companies.
Dow Jones earnings ahead
The DIA ETF has risen recently as investors focus on the ongoing earnings season, where some of its constituent companies published strong results.
Goldman Sachs stock jumped to a record high last week after the blue-chip bank published strong results, helped by its trading business.
The results showed that its net revenue rose to $12.7 billion in the third quarter, while its net earnings stood at almost $3 billion. Its global banking and markets division had $8.5 billion in revenues, while the asset and wealth management grew to $3.75 billion. Platform solutions had $391 million.
Goldman Sachs is benefiting from the ongoing recovery in mergers and acquisitions (M&A), trading, and wealth management. For example, its assets under management rose by $169 billion to $3.1 trillion.
JPMorgan, another important part of the Dow Jones, also surged to a record high after releasing strong financial results. Its net income jumped to $12.9 billion, while its managed revenue jumped to $43.3 billion.
JPMorgan is benefiting from robust lending, which grew to $1.3 trillion against $2.4 trillion in deposits. Its wealth and asset management businesses are also doing well this year. American Express also benefited from high interest rates in the last quarter.
However, some companies in the Dow Jones like Procter & Gamble and UnitedHealthGroup did not publish strong financial results. P&G said that its net sales retreated by 1% to $21.7 billion as its beauty, health care, and baby, feminine, and family care sales dropped.
Other Dow Jones constituents like Verizon, Coca-Cola, Walmart, and Amgen will publish their results in the coming weeks.
Read more: MS stock jumps 3% as Morgan Stanley smashes Q3 earnings expectations
Rising US Treasury yields
The DIA ETF is also reacting to the rising Treasury yields. Data shows that the 10-year bond yields rose to 4.20%, its highest point since July 29. It has also jumped above the 200-day Exponential Moving Average, pointing to more gains.
The 30-year yield has risen in the past four consecutive days, reaching a high of 4.521%, while the five-year has jumped to 4%.
These yields have soared as investors reassess their predictions about the Federal Reserve. Analysts expect the bank to maintain higher interest rates for longer since the economy has avoided a hard landing.
Recent economic numbers mean that the Fed has room for patience. For example, the headline Consumer Price Index (CPI) stood at 2.4% in September, while the core CPI was 3.2%. The unemployment rate has dropped to 4.1%.
Therefore, data by the CME Fed Watch Tool shows that the expectations are that the bank will cut rates by 0.25% in November followed by another 0.25% in December. The Dow Jones will likely benefit from these cuts.
Top DIA ETF stocks of 2024
Most companies in the Dow Jones have jumped this year. Walmart is the best-performing company in the Dow Jones as it jumped by over 53% this year. The company has benefited from robust store and online sales. It has also taken market share from pharmacy companies like CVS Health and Walgreens.
3M stock has jumped by 48% as its turnaround strategy continues. The other top gainers are companies like American Express, IBM, The Travelers, Goldman Sachs, and Caterpillar, which have risen by over 30% this year.
The top laggards were firms like Intel, Boeing, and Nike, which have plunged by over 24% as concerns about their businesses continued.
Is the Dow Jones ETF a good investment?
The Dow Jones index often has a close correlation with the Nasdaq 100 and the S&P 500 indices. In most periods, it rises when the two tech-heavy funds are rising.
However, its gains are often smaller than the two funds. For example, the DIA ETF has had a total return of 27% in the past three years, compared to the VOO and QQQM returns of over 34%.
Therefore, while it is a good fund for diversification, historical data shows that investors are better off investing in the S&P 500 and Nasdaq 100.
Read more: Here’s why SPY ETF is in trouble as IVV, VOO thrive in 2024
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