The 2 Most Surprising Stock Winners In the Dow Today

Stocks soared on Friday, with investors breathing a sigh of relief at the apparent end of worries about a government default. All three major market averages were up significantly.

Data source: Yahoo! Finance.

Some might have been surprised to see the Nasdaq Composite (^IXIC -0.64%) and S&P 500 (^GSPC -0.46%) underperform the Dow Jones Industrial Average (^DJI -0.98%). Yet what was even more surprising was that the biggest contributors to the Dow's gains weren't in the high-growth areas that investors have come to expect to produce big share-price moves higher. Instead, 3M (MMM -0.66%) and Caterpillar (CAT -7.02%) were the biggest winners in the Dow on Friday. Here's why.

3M looks to the future

Shares of 3M were 9% higher on Friday. The manufacturing giant has had shareholders concerned about potential legal liability that could endanger the entire business, but news reports suggest that the company might be close to putting those worries behind it once and for all.

3M had been scheduled to go to trial next week in the first of thousands of lawsuits alleging damages from products containing the controversial chemical PFAS. State and local governments across the U.S. are the plaintiffs in these suits, with various PFAS-containing products at issue. Estimates for total potential losses if the cases were to go against 3M had exceeded $140 billion, which is more than double 3M's current market capitalization.

However, chemical industry peers DuPont (DD -0.62%) and its spinoffs Chemours (CC -0.18%) and Corteva (CTVA -0.13%) agreed to a potential settlement of $1.185 billion to settle a class action suit involving roughly 300 communities. Following that, reports surfaced that 3M had reached a similar potential settlement for $10 billion or more, although the company didn't provide confirmation as of Friday afternoon.

Obviously, a settlement of this magnitude would be costly for 3M. But the company has lost more than $50 billion of its market capitalization over the past two years, largely because of fears about this prospective liability. If the reports turn out to be true, it'd be a big weight off 3M's shoulders.

Caterpillar picks up speed

Caterpillar made an even bigger impression on the Dow. Its shares were up the same 8% as 3M, but its higher share price meant that the heavy equipment manufacturer contributed more than 120 points to the Dow's upward move.

Caterpillar is economically sensitive, and so news that the U.S. employment situation remains favorable was welcome. For months now, higher interest rates and fears of a recession have contributed to less optimistic assessments of Caterpillar's prospects. With the company having seen net income climb past pre-pandemic levels, some were worried that a downward revision to the mean would be inevitable.

Yet there are still a lot of things going well for Caterpillar. With the debt ceiling issue resolved for now, shareholders are optimistic that much-needed infrastructure projects can go forward, which should support Caterpillar's business. Efforts to cut costs have also started to pay off for the company.

The bear market will end when a broad swath of stocks posts meaningful gains. Investors are excited that 3M and Caterpillar were big contributors to the Dow's move, and if they can keep rising, it could finally help Wall Street put 2022 behind it once and for all.