Rising bond yields, higher oil prices, and the threat of higher-for-longer interest rates have conspired to pull stocks lower, dragging Dow stocks into the red in the process.
At one point, the Dow, which is comprised of 30 blue-chip stocks, was up more than 5% on the year. However, a steady decline in equities that began in early August has now pushed the index into negative territory for the year.
The Dow is currently at its lowest level since early June of this year. However, investors shouldn’t worry too much about short-term volatility in the Dow.
The index is comprised of sector leading companies whose stocks have a history of out-performance. Many Dow stocks are ideal to own in a recession. Over the long-term, the Dow should be fine.
Here are Q4 stock predictions: seven Dow stocks ready to roar into 2024.
The microchip and semiconductor maker said the Programmable Solutions Group’s standalone operations will begin on Jan. 1, 2024.
Intel will report PSG’s financials as a separate business unit beginning with its first quarter 2024 financial results. Intel executive Sandra Rivera will become the CEO of the Programmable Solutions Group.
Intel said the IPO for the Programmable Solutions Group should occur in the next two years, and it may also look at divesting a minority stake in the business to private investors.
The separation comes after Intel last year completed a successful IPO of its Mobileye Global (NASDAQ:MBLY) business unit, which makes microchips and software for self-driving cars.
Investors applauded the Programmable Solutions Group’s spinoff, bidding up INTC stock 3% on the news. Intel’s shares have now gained 29% over the last 12 months.
Microsoft’s (NASDAQ:MSFT) stock performance continues to lag its mega-cap peers this year. So far in 2023, MSFT stock has risen 33%.
Decent, but much less that the gains seen in other technology names, many of which have tripled through nine months of the year.
However, Microsoft’s shares should get a lift from the pending approval of its $68 billion acquisition of video game maker Activision Blizzard (NASDAQ:ATVI). And the company continues to lead when it comes to generative artificial intelligence.
Plus, it was just announced that Meta Platforms (NASDAQ:META) new Quest 3 headset will support Microsoft Xbox video games, opening a new sales channel for the company’s gaming unit.
The company has some strong tailwinds and sentiment towards Microsoft is improving. Recently, Guggenheim analyst John DiFucci upgraded his rating on MSFT stock to “neutral” from “sell,” removing the last sell rating on the stock among professional analysts.
DiFucci wrote that Microsoft’s AI opportunity is “too strong a force to contend with.”
Shares of 3M (NYSE:MMM) are currently trading at their lowest level in 11 years. While disappointing, there is reason to hope that the stock may have finally hit bottom and could rise again.
At the end of August, 3M agreed to pay $6 billion to settle lawsuits brought against it by U.S. military veterans and service members who say they suffered hearing loss from using the company’s earplugs.
The settlement removes a cloud of uncertainty that had been hanging over the maker of Post-it-Notes and Scotch tape.
Also, the upcoming spin-off of 3M’s healthcare business could provide a catalyst for the stock moving forward. The company is scheduled to complete the spinoff of the healthcare business into a separate publicly traded company by year’s end.
The healthcare unit, which focuses on wound care, oral care, and healthcare technology, accounted for a quarter (25%) of 3M’s $34.23 billion in sales during 2022. The company recently announced the new CEO of the healthcare business.
There’s a great buy-the-dip opportunity in Coca-Cola (NYSE:KO) right now with the beverage company’s share price having fallen 7% in September as the market has slumped.
The Dow component is now down 13% on the year and trading below $55 a share. The stock is on its longest losing streak since 2018.
Investors should load up on KO stock while it’s on sale and take advantage of a historically low price-earnings ratio of 22 and a quarterly dividend payment of 46 cents per share, which gives it a yield of 3.35%.
The decline in KO stock is almost entirely because of the market downturn that began in August. There’s nothing wrong with the Coca-Cola Company or its stock.
In fact, the weakness has occurred despite Coke reporting strong financial results for this year’s second quarter. At the end of July, Coca-Cola reported profit and sales that each beat Wall Street forecasts.
The company also raised its outlook for the rest of this year, saying it expects earnings per share growth of 5% to 6% and revenue growth of 8% to 9%. Buy the dip in KO stock.
Another Dow stock that has pulled back despite strong Q2 results is cloud computing giant Salesforce (NYSE:CRM). The company’s share price initially popped 6% after it posted Q2 results at the end of August that beat Wall Street expectations.
However, since then, CRM stock has fallen 7%. As with Coke, Salesforce’s decline appears to be due to gloomy investor sentiment and worries that interest rates will be higher for longer than previously thought.
Salesforce’s Q2 print was a crowd pleaser, with the company beating on both earnings and revenue. Looking ahead, Salesforce raised its guidance for the just completed third quarter, saying it expects EPS of $2.05 to $2.06 on $8.7 billion to $8.72 billion in revenue.
That outlook was ahead of analysts’ forecasts for Q3 earnings of $1.83 a share and $8.66 billion in revenue. As a bonus, Salesforce announced a brand new AI Cloud platform that includes tools for marketing and data analytics. CRM stock is currently up 50% on the year.
Procter & Gamble (PG)
If there’s a good stock to own during a recession, it’s Procter & Gamble (NYSE:PG).
The maker of essential products such as Pampers diapers, Crest toothpaste, and Gillette razor blades tends to perform well in any type of economy. Should we tip into a recession in 2024, Procter & Gamble could be a good defensive stock to own.
To be sure, its name brand products such as Tide laundry detergent and Olay skin care products can be pricey and are subject to consumers switching for generic brands. But it’s overall portfolio of products is very diverse.
Procter & Gamble also has pricing power and can lift prices without losing customers. The company raised its prices an average of 7% during its most recent quarter after lifting them 10% in the previous quarter.
The price hikes helped to power Procter & Gamble to fiscal Q4 earnings of $1.37 a share on revenue of $20.6 billon. Wall Street had been expecting earnings of $1.32 a share on revenue of $20 billion. PG stock is down 4% this year but is up 77% over the last five years.
Home Depot (HD)
Retailer Home Depot (NYSE:HD) is another company whose stock looks cheap right now. Year to date, HD stock is down 8% and currently trading at only 18 times future earnings.
The company also pays a quarterly dividend of $2.09 per share for a yield of 2.87%. The slump in the share price is because of slowing consumer spending and concerns about the direction of the housing market, which is struggling under the burden of high interest rates.
However, like the other Dow components on this list, Home Depot has produced strong financial results despite facing many headwinds. The company’s Q2 results beat Wall Street expectations with EPS of $4.65 versus $4.45 that was expected by analysts.
Revenue in the April through June period totaled $42.92 billion compared to $42.23 billion that had been forecast. Plus, Home Depot announced as part of its Q2 earnings a new $15 billion stock buyback program that takes effect immediately. HD stock is up 48% over five years.
On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.