Why Hewlett-Packard Stock Is Rallying the Dow Today

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Hewlett-Packard (NYSE: HPQ  ) stock is up 2.8% today following some analyst upgrades and a legal victory. After some mixed economic reports were released, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up 0.5% as of 1:20 p.m. EDT, while the S&P 500 (SNPINDEX: ^GSPC  ) is up 0.4%.

There were two U.S. economic releases today.

Report

Period

Result

Previous

NFIB small business index

August

94.1

93.5

Retail sales

July

0.2%

0.6%

Core retail sales

July

0.5%

0.1%

July's retail sales were up a seasonally adjusted 0.2% from June and up 5.4% year over year. The increase falls short of both June's 0.6% and analyst expectations of a 0.3% rise. Seasonally adjusted core retail sales -- i.e., retail sales excluding automobiles -- were up 0.5%, better than June's 0.1% and slightly above analyst expectations of a 0.4% rise.

US Retail Sales Chart

US Retail Sales data by YCharts.

The tepid retail-sales report shows that consumers continue to slowly increase their spending. We continue to wait for the economy's growth rate to strengthen, and this report shows that we may be waiting for a while.

While the market's response to today's releases is tepid at best, one stock is taking off. Hewlett-Packard is making sizable gains on two pieces of good news. A judge in California dismissed a lawsuit brought against HP and former CEO Mark Hurd by a pension fund alleging that HP committed fraud when it didn't disclose Hurd's violation of its code of conduct sooner. The judge ruled that HP's decision not to disclose Hurd's relationship sooner did not have an effect on the stock price. 

The icing on HP's cake today is that Citibank and Morgan Stanley are both taking more positive views of the stock. Citibank analyst Jim Suva added HP to his U.S. focus list, citing HP's ongoing turnaround and his belief that HP will beat expectations when it reports earnings next week. Morgan Stanley analyst Katy Huberty wrote that she believes HP is poised to benefit from an improving IT market and that the effects of cost-cutting measures will begin to be seen. HP is now up 93% for the year, and you have to wonder how much of a turnaround is already priced into the shares.

While HP has taken off this year, longtime shareholders are still underwater, with the stock down 40% over the past five years. If you are tired of watching your stocks continue to move at a glacial pace, Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks -- and he wants to share it, along with a few of his favorite growth stock superstars, with you. It's a special 100% free report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains and click here for instant access to a whole new game plan of stock picks to help power your portfolio.

 


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