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The Dow Is Sputtering – But One Core Stock Just Got a Major Upgrade

Last Updated September 23, 2020 2:24 PM
Josiah Wilmoth
Last Updated September 23, 2020 2:24 PM
  • The Dow Jones was little changed on Wednesday.
  • The Nasdaq and S&P 500 are both trading at record highs, while the DJIA is still in the red for the year.
  • Could a brick-and-mortar stock push the index over the finish line?

After the S&P 500 notched a new record  yesterday, the Dow Jones Industrial Average (DJIA) is the final one of Wall Street’s three primary indices still languishing below its pre-pandemic highs.

If today’s action is any guide, it’s going to be a while before it gets there.

Dow Fails to Join S&P 500 and Nasdaq in Record Territory

As of 9:37 am ET on Wednesday, the Dow had gained a paltry 34.74 points or 0.13%. That lifted the index to 27,812.81.

dow jones today, stock market
The Dow was little changed on Wednesday, gaining a few dozen points. | Source: Yahoo Finance 

The Dow’s current closing record is 29,551.42, which the index set on February 12.

The S&P 500 followed its record close with a gain of 0.16%. It last traded at 3,395.30.

The Nasdaq narrowly outperformed its peers, rallying 0.19% to 11,231.64.

Forget Apple: The DJIA’s Hidden Gem Is About to Give the Index a Boost

home depot, dow jones today
Home Depot may not be the sexiest stock in the index, but it’s quietly gained more than 30% in 2020 alone. |   Source: Bruce VanLoon/Shutterstock.com

The Dow needs a boost if it’s going to join the S&P 500 and Nasdaq in record territory. According to Bank of America, it’s about to get one – from a place you might not expect.

While tech stocks have been the unquestioned leaders of the market’s ascent, BofA just turned bullish on a brick-and-mortar company. It’s not just any brick-and-mortar store, though. It’s one that will actually sell you both bricks and mortar: Home Depot.

Home Depot may not be the sexiest stock in the index, but it’s quietly gained more than 30% in 2020 alone. The overall Dow Jones Industrial Average is still down more than 2.5%.

home depot stock today, DJIA
Home Depot stock has outperformed the overall Dow Jones by a considerable margin in 2020. | Source: Yahoo Finance 

And Bank of America says HD shares still have plenty of upside .

BofA upgraded Home Depot to “buy” in reaction to its blockbuster earnings report – which revealed the home improvement retailer’s strongest sales growth in almost two decades. Watch the video below for more details.

BofA put a $330 price target on the stock, implying futures gains of more than 15%. Analysts predict an “urban exodus”  will provide long-term tailwinds to the home improvement industry.

They explained:

We are upgrading HD to Buy from Neutral and raising our price objective to $330 from $290 after HD’s record 2Q results, which we believe will not be the last of HD’s strong run. Our PO is based on 28x our 2021 EPS estimate.

Although home improvement spending in the coming quarter may decelerate amidst sequentially declining government stimulus/ unemployment benefits, we believe that the longer-term tailwinds for the home improvement industry are generally favorable, as we’ve discussed in our Home Work series, due to wallet share shift into the home and urban exodus.

Home Depot is currently the third most heavily weighted stock in the Dow Jones, accounting for roughly 7% of the total index.

That share will increase in less than two weeks, when Apple’s four-for-one stock split  knocks the nearly $2 trillion tech giant off its perch as the Dow’s most influential component.