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.
And here's the big punchline. IBM didn't actually do anything to deserve the Dow-driving status today. Big Blue's big jump is based on strong results from direct rival Hewlett-Packard (NYSE:HPQ), which left the Dow Jones two months ago.
Oh, the irony.
Hewlett-Packard crushed analyst targets in last night's fourth-quarter report. HP shares are trading 7.6% higher today thanks to this fantastic report.
Investors could have taken HP's strength as a terrible sign for IBM under the theory that HP is stealing contracts from its enterprise-computing rival. Instead, Mr. Market is taking the Hewlett-Packard report as a good sign for the IT market, in general.
HP's revenue shock was based on hardware sales, with server systems rising 10% year over year. IBM and Oracle (NYSE:ORCL) are the other big names in server systems besides HP, and both stocks crushed the Dow today. Microsoft (NASDAQ:MSFT) also tagged along, despite Redmond's software focus. You could argue that HP's report actually powered 19 points of Dow gains today, turning a potential down day into a small gain.
Not too shabby for a stock that was shown the door in September.
Now, I'm not sure that this was the correct market reaction to HP's big quarter. After all, HP took pains to note that its server sales were "significantly outpacing the market." In other words, HP appears to be stealing market share from Oracle and IBM after all. The "outpacing the market" note wouldn't have been there if the server market as a whole were booming with broad-based demand.
Microsoft's 0.8% jump might still be well-deserved, because the company supplies software for server systems of every major brand. What's good for HP's goose should be good for Microsoft's gander in a manner that really doesn't apply to Oracle or IBM.
But Mr. Market isn't always totally rational, so IBM is your Dow Jones hero of the day. And you should thank Hewlett-Packard for this parting gift of positive Dow points.