Why Dow Stock Floated Higher Today
Key Points
A top-down analysis of the U.S. chemical sector is predicting notable growth over the next few years.
It is expected to expand by 36% between last year and 2033.
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An optimistic analysis of the U.S. plastics market was the spark that ignited a surge in Dow (NYSE: DOW) stock on Hump Day. The storied chemical company, which has been a laggard of a stock over the past year or so, saw its price leap more than 6% skyward as a result.
Major improvements
Before market open that day, Research and Markets published a report on the state of the market. Titled "The United States Plastic Market Report by Type, Application, End User, States and Company Analysis 2025-2033," the report asserts that the domestic plastics industry is positioned for robust growth in the coming years.
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The firm's analysts are forecasting that, fueled by a compound annual growth rate (CAGR) of just under 4%, the American plastics industry will expand from a bit over $195 billion last year to more than $266 billion by 2033.
According to them, this growth will stem from rising demand in various industrial sectors, including automotive, construction, and packaging. Innovations in next-generation, sustainable plastic technologies will also play a role.
Beaten-down, but not out
Dow stock was a significant underperformer last year, as the company has been burdened by a mix of negative factors. Among these are oversupply, rising costs for inputs, and relatively weak demand globally. A 50% cut to the company's once-generous dividend didn't help improve investor sentiment.
Could this be the start of a rally for the shares? I wouldn't be so sure, as Dow's struggles are far from over. However, the chemical industry is cyclical, and it could turn when and if those negative factors play out. Personally, though, I don't see many signs of an impending change at the moment, so I'd probably sit on the sidelines with Dow stock for now.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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