The Dow Jones Industrial Average, an index of 30 blue-chip stocks meant to act as a bellwether for the American economy, has been moving in fits and starts this year. So far in 2024, the index is up a ho-hum 3%. As is often the case, the Dow 30 is lagging behind the other two major U.S. stock indices. The benchmark S&P 500 index is up nearly 10% year-to-date, while the technology-filled Nasdaq index has increased by nearly 11%.
The Dow’s spotty performance is due to a handful of stocks that continue to languish in the red. These laggards are well-known companies that have been struggling lately due to a combination of inflation and high interest rates that have hurt the consumer spending these names rely on for their sales. This isn’t a situation unique to the U.S. Economies and markets around the world have experienced a slowdown in consumer spending due to the current environment. Sadly the situation looks likely to get worse before it gets better.
Here are three Dow stocks to sell in May before the crash and burn.
Home Depot (HD)
Retailer Home Depot (NYSE:HD) is undertaking the biggest acquisition in its history, buying privately held SRS Distribution for $18.25 billion as it bets on future growth coming from sales to professional contractors rather than consumers. Executives at the company have said during earnings calls that sales growth is being driven by contractors, roofers, and other home professionals after the COVID-19 pandemic. While that might be true, the purchase of SRS Distribution comes at a sensitive time.
Home Depot has struggled in a difficult operating environment over the past year as demand for home improvement projects has cooled and consumers have pulled back their spending, particularly on big-ticket items such as appliances, due to inflation and high interest rates. Home Depot most recently forecasted that its sales would grow by 1% this year. That was below the 1.6% increase forecast by analysts. HD stock fell 4% after its most recent earnings print. The company next reports financial results on May 14.
HD stock is flat year-to-date.
3M (MMM)
There’s a lot of change and uncertainty going on at 3M (NYSE:MMM) right now. Earlier this year, the maker of Post-it notes spun off its healthcare business into a new publicly traded company called Solventum (NYSE:SOLV), which started trading on April 1. At the same time, 3M just replaced longtime CEO Mike Roman on May 1. William Brown, the former CEO of L3Harris Technologies (NYSE:LHX), has taken the helm of the company. These changes come as 3M settles several major legal cases against it.
3M has finalized two major legal settlements, agreeing to pay $10.3 billion to address chemical spills in drinking water and $6 billion to resolve lawsuits related to its military earplugs. While the settlements alleviate some uncertainty that has been hanging over the company, they also saddle 3M with expensive payments that are sure to impact the company’s financial results and share price in the near term. While MMM stock is up 4% this year, it is down 35% over the last five years, making it a Dow stock to sell.
Nike (NKE)
Sneaker and athletic apparel giant Nike (NYSE:NKE) continues to be one of the worst performers in the Dow Jones Industrial Average. Down 26% in the last 12 months, including a 12% drawdown so far in 2024, NKE stock continues to be a laggard when it comes to Dow components. Corporate earnings released at the end of March showed a continued slowdown of sales in China, further depressing the share price. The chronic underperformance makes Nike a Dow stock to sell in May before things get any worse.
In its latest print, Nike reported that its China sales increased 5% on an annualized basis, which marked a deceleration as that country’s economy has been slowing down. In Europe, the Middle East and Africa, revenue declined 3% year over year. The company expects total sales to grow only 1% this year. Last December, Nike announced a restructuring plan to reduce its costs by $2 billion over three years. More recently, the company cut 2% of its global workforce or about 1,500 jobs. But those moves still don’t seem to be enough for investors.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.