How These Stocks Could Take the Dow to 16,000

The Dow Jones Industrials (DJINDICES: ^DJI  ) may have finished just short of the 15,000 mark, but its intraday push above the key landmark reawakened hopes that the four-year-old bull market might still have further to run. With the Dow, the S&P 500, and the small-cap Russell 2000 all at record highs, the prospects for the U.S. stock market are looking up. Yet, with the Dow having passed one intraday milestone today, what would it take for the market to reach 16,000?

For the Dow to make another run higher of nearly 7% to get to 16,000, it'll need support from the same stocks that led it higher today. Caterpillar (NYSE: CAT  ) soared 3.5%, the top gainer in the Dow, as investors applauded the prospects of stronger economic activity in the company's key U.S. market. Yet, even with today's gains, Caterpillar remains more than 10% below its recent highs, reflecting anxiety about the company's other key market: China. Fellow industrial component Alcoa (NYSE: AA  ) , which climbed almost 2% today, faces the same general issue, as sluggishness in the Chinese economy has contributed to weak aluminum prices industrywide that have held down profits.

Clearly, strength in the U.S. economy will carry over somewhat to China, given the importance of the trade relationship between the two nations. But, as the Chinese economy grows, its fluctuations become more independent of movements in other markets, with stronger connections to internal conditions. As long as fears about a property bubble linger in China, it'll be hard for more favorable economic conditions elsewhere to have a positive effect on the country's prospects. If China gets its act together, however, it'll be Caterpillar and Alcoa that help lead the way higher for the Dow.

That isn't the only scenario under which Dow 16,000 is possible. 3M (NYSE: MMM  ) , which gained 1.7% today, has been trying to reawaken its spirit of innovation, and even though its challenges haven't kept the stock from hitting new all-time highs of its own, 3M has a lot more growth potential if it can return to its innovative roots. If the company can get back on track, then it could be an important part of a Dow advance, especially given its high share price and its effect on the price-weighted Dow.

Finally, Boeing (NYSE: BA  ) rose 1.7% today after announcing that its X-51A experimental military aircraft reached Mach 5 for three-and-a-half minutes, the longest such flight ever. Advances like this point to Boeing's opportunity not just in commercial aircraft, but throughout the aerospace industry, and even though defense budget cuts have dampened expectations for military expenditures, useful products like the X-51A could bring on must-have innovations that could add to Boeing's potential. The broad impact that Boeing has on other Dow components that make parts and supplies for its aircraft could amplify the effects of new discoveries, pushing the Dow still higher.

All of these stocks could help the Dow set new records, but out of all of them, Boeing arguably has the biggest opportunity. To learn more about whether Boeing has what it takes to meet the challenge, we've prepared a premium research report on the company, in which two of The Motley Fool's best minds on industrials have collaborated to provide investors with the key, must-know issues surrounding Boeing. They'll be updating the report as key news hits, so don't miss out -- simply click here now to claim your copy today.


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Related Tickers

9/18/2014 4:31 PM
^DJI $17265.99 Up +109.14 +0.64%
DOW JONES INDUSTRI… CAPS Rating: No stars
AA $16.20 Down -0.08 -0.49%
Alcoa, Inc. CAPS Rating: ****
BA $128.58 Up +0.82 +0.64%
The Boeing Company CAPS Rating: ****
CAT $104.34 Up +0.35 +0.34%
Caterpillar, Inc. CAPS Rating: ***
MMM $146.84 Up +1.47 +1.01%
3M CAPS Rating: ****

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