Dow: The Election Breathes, HP Groans
The Dow Jones Industrial Average (INDEX: ^DJI ) is heating up this morning, up 38 points, or 0.28%, as of 10 a.m. EDT. Meanwhile, the S&P 500 (INDEX: ^GSPC ) is up five points, or 0.36%. Part of this positive sentiment may be linked to a presidential election contest that breathed a new sign of life yesterday.
I purposely did not watch last night's debate between Barack Obama and Mitt Romney, but the consensus among the high-quality sources I monitor appears to be that Romney carried it in a contest that went to the judges' scorecard (no one delivered a knock-out blow). This is not entirely unexpected for analysts who had assessed the two candidates' strengths and records within this format. On intrade, a real-money prediction market, the probability that Romney is elected had advanced by 2.5 percentage points by 8:15 a.m. EDT to just less than 36%.
Faithful readers of this column will know that I have been banging on about the extraordinarily depressed levels of stock market volatility -- realized and implied -- and I'm far from the only one who has noticed. Because of the indirect link between the VIX index (INDEX: ^VIX ) , profiting from the observation is very, very difficult; however, that hasn't stopped investors from trying. Assets invested in ETFs linked to the VIX and its European equivalent, the VSTOXX, hit record levels in September. I don't recommend individual investors use these products, but I think the VIX is a fascinating indicator of investor sentiment (overly complacent, in this instance).
This has been a rough week for "old" tech. On Monday, Google overtook Microsoft in terms of market capitalization. Yesterday, in a meeting with investors, Hewlett-Packard (NYSE: HPQ ) CEO Meg Whitman lowered guidance for the fiscal year 2013 to $3.40 to $3.60 against a consensus forecast of $4.16, warning that "it's going to take longer to right this ship than any of us would like." Investors certainly "didn't like," sending the stock down 13% yesterday; I expect it to come under continued pressure today.
Mrs. Whitman's halo, acquired at eBay, is waning -- a reminder that star CEOs are rarely as talented as analysts and pundits give them credit for. It's a lot easier to look like a star when you're piloting a ship with strong tailwinds behind it rather than one that is being battered by a heavy storm. The same is true for investors: It's easier to make star investments when you're sailing with the tides of favorable economics and expanding opportunity. You can put those forces to work for you with the "3 Stocks to Own For The New Industrial Revolution."