The Dow Soars on Fed-Fueled Hope As Coca-Cola, Nike Jump

Consumer stocks led the Dow higher, which is consistent with the Fed's pronouncement.

Jun 18, 2014 at 9:03PM

After getting off to a slow start, the Dow Jones Industrials (DJINDICES:^DJI) punched into overdrive in the afternoon, as the Federal Reserve gave a positive assessment of the economy and inspired stock market investors to conclude that the bull market for the Dow could continue at least into 2015. In particular, consumer-facing stocks scored some of the best gains, with Coca-Cola (NYSE:KO) and Nike (NYSE:NKE) leading the Dow Jones Industrials higher Wednesday.


Coca-Cola climbed more than 1.5% as speculation swirled over the possibility of a full takeover of the beverage giant by Warren Buffett. Buffett has denied those rumors, and Coca-Cola is likely too big even for his war chest of cash to allow for a potential acquisition bid. Yet given the current mergers and acquisitions environment, no deal seems too rich for investors to consider as a possibility, even ones involving components of the Dow Jones Industrials. In the meantime, Coca-Cola's 3% dividend yield looks a lot better in light of an ongoing commitment from the Fed to keep its monetary policy accommodative well into the future, almost guaranteeing that interest rates on high-quality bonds will remain low and give Coca-Cola a competitive advantage for shareholders.


Source: Nike.

Nike almost matched Coca-Cola's 1.5% gain, with strength in the economy pointing to the potential for customers to pay up for Nike's premium apparel and electronics products. Yesterday, Nike released its FuelBand app for the Android operating system, widening the wearable device's appeal for users of smartphones and tablets running operating systems other than iOS. Nike has had to deal with heightened competition from rival apparel and footwear companies, with Adidas in particular getting a lot of exposure during the 2014 World Cup in Brazil. In the long run, though, Nike's appeal across multiple sports makes it a logical growth candidate, and as long as consumers have the disposable income to spend, Nike can expect to get its share of customer spending.

Catering to consumers is a major part of the U.S. economy, and many members of the Dow Jones Industrials beyond Coca-Cola and Nike concentrate on delivering what consumers want and need. The Federal Reserve clearly believes that keeping consumers in a solid position to keep spending is a positive for economic growth. As long as its strategies continue to bear fruit and keep confidence high both among investors and throughout the nation as a whole, then the Dow's consumer giants should be able to keep posting gains well into the future.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Nike, owns shares of Nike, and has options on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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