Five stocks leading the Dow's blistering rally

The Dow Jones Industrial Average has extended its winning streak into 2018, building on the gains experienced in 2017, thanks in large part to solid economic growth and the optimism surrounding President Trump’s tax reform.

While the Dow has charged higher in 2018, five of the index’s 30 component companies are responsible for most of the gains. They are Boeing, (NYSE:BA), Merck (NYSE:MRK), IBM (NYSE:IBM), Caterpillar Inc.  (NYSE:CAT) and Cisco Systems, Inc. (NYSE:CSCO), which together make up more than half of the Dow’s percentage gains experienced so far in 2018.


Boeing was flying high on good momentum when it entered 2018. It was also the top performing Dow component stock of 2017. The planemaker booked a record 763 commercial airplanes in 2017 and entered 2018 on good momentum having booked $134.8 billion at list prices, through Dec. 31, 2017.

New developments for the company in 2018 include the formation of a joint venture with Adient Aerospace that will develop, manufacture and sell a portfolio of seating products to airlines and aircraft leasing companies. The company also unveiled a new unmanned cargo air vehicle prototype.


Merck has made some progress when it comes to drug developments. Even though, we are still in the first month of the year, the FDA accepted the company’s New Drug Applications for Doravirine, a potentialHIV-1 infection treatment, and released a bunch of positive developments for Keytruda.

Most recently, on Jan 16, the company reported positive results from its Phase 3 KEYNOTE-189 trial  for Keytruda. According to the study, a cocktail treatment of Keytruda and two chemotherapy medicines helped lung cancer patients live longer and stopped the disease from advancing.

The positive movement is welcomed after 2017 wasn’t a particularly good year for Merck. Shares crashed in October after the company said it would make survival a main goal of the lung cancer trial and extended the study by up to a year, as reported by Reuters.


Unlike many of the other companies listed here, IBM didn’t have a great performance in 2018. Instead, shares are moving higher on the optimism that things are turning around on the company. The catalyst for a move higher in shares happened when Barclays upgraded the stock and issued some positive commentary.

Barclays upgraded the company to overweight from underweight saying the company could emerge as the next important cloud vendor after Amazon and Microsoft. Moskowitz said IBM’s revenue may prove stable or even grow over the next 12-18 months.


Caterpillar was a top performer in 2017 – and for 2018.  tax reform could provide another boost to the company, according to JPMorgan analyst Ann Duigan. In a note to clients, Ann Duignan said, "The Tax Cuts and Jobs Act supports replacement of equipment at an accelerated pace through 2022 as both new and used equipment are now eligible for expensing, a positive for Caterpillar's North American end markets." She raised her price target on the company to $200 from $144.


Cisco is another top performer of 2017 that has extended its winning streak. Cisco shares got an additional boost after Bank of America analyst Tal Liani upgraded the company to buy from neutral and hiked his price target to $46 from $37."The company is in the early stages of a positive transition to software," Liani said. "While the strategy shift is not new, we believe now is the right time given the added benefit of domestic capex tailwinds and tax reform."