Stock Market Carnage Barely Touched This Dow Stock

Today, the Federal Reserve spoke, and investors didn't like what they heard. In what has become typical backwards fashion, the stock market responded negatively to the Fed's fairly positive assessment of future economic prospects, with calls for unemployment to fall to 6% within the next couple of years and for inflation to remain muted. Although the Fed didn't change its current trillion-dollar annual pace of bond purchases, most investors took the news as an indication that a reduction in those purchases is imminent, and the Dow Jones Industrials (DJINDICES: ^DJI  ) plunged 206 points in a broad-based sell-off that pulled every one of the Dow's 30 components lower.

When you think of prospective candidates to survive the worst of the Dow's carnage, Hewlett-Packard (NYSE: HPQ  ) wouldn't be on most people's lists. But HP was the best performer in the Dow today, losing only a single penny. With the company having replaced former personal-computer segment head Todd Bradley with Dion Weisler yesterday, HP now looks poised to salvage what it can from the struggling PC industry. Meanwhile, Bradley will turn his attention to moving forward with strategic-growth initiatives to capitalize on more promising prospects, such as emerging markets. These and other moves will present continuing challenges for HP, but in the long run, they should help the tech giant evolve into a company that's more likely to survive.

Also making the best of a bad day was Caterpillar (NYSE: CAT  ) , which limited its losses to a third of a percent. The construction-equipment industry has had a bad few months, as weakness in the global economy has dampened levels of construction activity, leading rival Terex (NYSE: TEX  ) to reduce its earnings guidance for the year. But if the Fed's assessment of the U.S. economy is correct, then Caterpillar's rise today might mark the beginning of an upturn for more cyclically focused stocks, defying the general good-news-is-bad-news sentiment that investors have adopted lately.

Finally, beyond the Dow, there were a few outright winners in today's market plunge. Qihoo 360 (NYSE: QIHU  ) gained almost 3% as it continues to build its position in fighting against Chinese search market leader Baidu. Fool contributor Kevin Chen recently observed that in his opinion, Qihoo's products are inferior to Baidu's, but Qihoo has nevertheless successfully used its strength in antivirus software to make a powerful entry into search and browsers. As long as users want multiple options, Qihoo could become the permanent No. 2 in the market, and given the size of the Chinese Internet market, that's an enviable position to be in.

Will HP's rapidly shift in strategy under the new leadership of CEO Meg Whitman make it one of the least appreciated turnaround stories on the market? The Motley Fool's technology analyst details exactly what investors need to know about HP in our new premium research report. Just click here now to get your copy today.


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  • Report this Comment On June 20, 2013, at 8:01 AM, TonyP4 wrote:

    It could be the beginning of the expected 10% correction.

    From my new book Debunk the Myths in Investing (from amazon):

    Many including myself do not believe a market plunge is coming as of 6/2013. The pumping of money creates a non-correlation of the economy and the market cycle (Chapter 38). However, we have to be careful with the following analysis. Run the simple chart described in Chapter 39 to spot any indicator of the market plunge.

    o Among my top-performing screens for the last 3 months, there are more top screens from the peak stage (defined by me) than other stages in a market cycle.

    o The typical market cycle is about 4 years. We have about 6 years since 2007.

    o The stock market does not reach the bubble stage. It will if it continues to rise in this pace.

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