The five biggest Dow Jones Industrial Average gainers Friday had a theme to them: they all have cyclical characteristics and are reopening-sensitive.
The S&P 500 rose 0.3%, carried by the components on the tech-heavy Nasdaq, which rose 0.42%. Still, the cyclical value had a strong day. With that, the 10-Year Treasury yield has risen this week, although fell a bit to 0.72% Friday, the day after the Federal Reserve said it will adopt an even more inflationary policy than it had previously planned.
The Dow, which features a heavier tilt towards value than growth, rose 0.4%. This is the last day the Dow will feature such a tilt, as Salesforce (CRM) - Get Report, the dominant and growing software services company, will be added to the index.
Here were the 5 biggest gainers on the Dow by noon:
Walmart is mostly a defensive company — a consumer staple — but it is partnering with Microsoft (MSFT) - Get Report in a bid to buy TikTok, which could sell at a price between $30 billion and $40 billion. This compares to Walmart’s market cap of about $395 billion, so the valuation is about 8% of the market cap. Walmart shares had already run up a bit on the news and it would share the company with Microsoft.
Coca-Cola is also a consumer staple, but a decent portion of its sales come from sporting events and restaurants, which are indeed cyclical and are sensitive to state reopenings. The stock has been treated somewhat as if it’s consumer discretionary this year. Meanwhile, large-cap consumer staples were down about 0.3% in Friday’s risk-on equity market.
States have paused reopening plans, but a solid Friday retail sales reading for July, coupled with the promise of multiple vaccines to soon hit the market from large producers is the juice for Coca-Cola shares. Investors are looking past an increasingly cloudy time table on the next batch of fiscal stimulus. With the 0% benchmark lending rate unable to fall from there and small businesses struggling, fiscal stimulus is crucial to the speed of the economic recovery and for stocks like Coke.
Disney is seen as a reopening stock for its parks business and reliance sports advertising.
Raytheon, traditionally an aerospace and defense contractor, is now merged with United Technologies and has some cyclicality embedded in its business. The stock is down about 4% since August 10, as it’s being taken off of the Dow, which forces ETFs and indexed mutual funds to mimic the index to sell the stock. It’s rebounding Friday.