The Dow Jones Industrial Average is drifting higher on Wednesday despite losses in the European session amid ongoing chatter of a bond-buying tapering by the European Central Bank. Long-term Treasury bonds remain under pressure, which in turn continues to pressure safe havens like gold, yield-focused stocks (real estate, utilities and telecom) and corporate bonds.
Adding to the dynamic has been some hawkish commentary from the Federal Reserve, with Richmond Fed president Jeffrey Lacker out again today saying there is a strong case to raise rates more rapidly (building on comments from Tuesday night).
For now, investors are still treating all this as benign, or even a positive, in the case of financial stocks. The thinking is that higher long-term rates will boost net interest margins and thus profitability at banks. Higher rates, however, will pinch demand for auto and home loans. Or that banks face market-to-market losses on their bond holdings.
Bubbling under the surface, a growing number of big-cap stocks are rolling over, including these five Dow Jones components.
Dow Jones Stocks to Watch: General Electric (GE)
General Electric Company (NYSE:GE) shares have stagnated below their 200-day moving average since early September and look ready to violate a two-month support level. That would set up a return to the May-June lows near $29, and possibly a drop all the way back to the February lows near $26.50.
The company will next report results on Oct. 21 before the bell. Analysts are looking for earnings of 32 cents per share on revenues of $30 billion.
Edge Pro subscribers are holding a position in the Oct $29.50 GE puts.
Dow Jones Stocks to Watch: Coca-Cola (KO)
The Coca-Cola Co (NYSE:KO) shares look ready to drop out of a two-month consolidation range as the downtrend that started in April accelerates.
The stock suffered a “death cross” in September, as its 50-day moving average crossed below its 200-day average for the first time since the spring of 2015. Attribute this to intensifying competitive pressure from PepsiCo, Inc. (NYSE:PEP).
The company will next report results on Oct. 26 before the bell. Analysts are looking for earnings of 48 cents per share on revenues of $10.4 billion.
Dow Jones Stocks to Watch: McDonald’s Corporation (MCD)
McDonald’s Corporation (NYSE:MCD) shares are already down nearly 13% from their May highs as the tailwinds from the all-day breakfast initiative fade. The stock is now at risk of dropping below its August lows, setting up a return to levels last seen in February.
A drop below $110 would risk a reversal of the gains earned since turnaround plans started to be priced into the stock last September, resulting in a gain of nearly 40%.
The company will next report results on Oct. 21 before the open. Analysts are looking for earnings of $1.48 per share on revenues of $6.3 billion.
Dow Jones Stocks to Watch: 3M (MMM)
3M Co (NYSE:MMM) shares have fallen out of their post-July sideways pattern to test support from the June highs near $170. This is the first significant pullback for the blue-chip titan since enjoying a 33%-plus surge out of its January low.
Investors started losing enthusiasm back in late July when the company lowered its revenue outlook.
The company will next report results on Oct. 25 before the bell. Analysts are looking for earnings of $2.14 per share on revenues of $7.7 billion.
Dow Jones Stocks to Watch: Verizon (VZ)
Verizon Communications Inc. (NYSE:VZ) shares have been pushed under their 200-day moving average for the first time since January, down nearly 10% from their summertime high.
A combination of factors, including saturation in the smartphone market and the pressure from the current increase in long-term interest rates, has dampened investor enthusiasm in the telecom giant, which carries a 4.6% dividend yield.
The company will next report results on Oct. 20 before the bell. Analysts are looking for earnings of 99 cents per share on revenues of $31.2 billion.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
