Hewlett-Packard Company (HPQ), The Boeing Company (BA), Alcoa Inc (AA): Consumers Kept Wallets Open in July, Boosting Stocks

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

Despite an economy that never seems to gain steam, consumers are spending like we’re back in boom days again. The Department of Commerce’s retail sales report shows another sign of consumer strength, with overall sales up 0.2% in July, or 0.5% when you exclude auto, gas, and building materials. The confidence may not make sense on the surface, but falling layoffs, rising stock markets, and swelling home values give consumers a sense of confidence that’s helping to drive figures higher.

Stock markets didn’t spike on the positive news, but shares are trading higher this afternoon. As of 3:15 p.m. EDT the Dow Jones Industrial Average (Dow Jones Indices:.DJI) is up 0.28%, while the S&P 500 (S&P Indices:.INX) has gained 0.33%.

Hewlett-Packard Company (NYSE:HPQ) is pacing the Dow Jones Industrial Average (Dow Jones Indices:.DJI)’s gains today, rising 1.9%. Analysts from both Citibank and Morgan Stanley released positive reports on the company, predicting an earnings beat next week and citing “identifiable positive catalysts for the stock.” There’s no doubt that Hewlett-Packard Company (NYSE:HPQ) has an opportunity to be a great investment at 7.4 times next year’s earnings estimates, but each of its businesses is in decline, and unless the company can make a splash in tablets or smartphones, I see a value trap coming.

The Boeing Company (NYSE:BA)’s shares are also up 1.9% after the company delivered its first 737-800 to Iraqi Airways. This is the first of 30 aircraft ordered in 2008 and 39 total that the company has on order. The Boeing Company (NYSE:BA) has gotten a lot of bad press because of its problems with the 787 Dreamliner, but its stock is up 43% so far this year, so investors are clearly brushing off those problems. Today’s announcement was business as usual, but it’s a step in the right direction with an especially important customer.

The big loser on the Dow Jones Industrial Average (Dow Jones Indices:.DJI) today is Alcoa Inc (NYSE:AA), which has dropped 1.2%. The stock was the biggest gainer on the Dow last week following a report that China’s factory output had increased almost 10% in July, but that’s not the kind of fundamental pop that can keep investors engaged. Once investors who buy in on news from China dry up, the stock often sinks back to prior levels. That’s why investors should buy stocks based on fundamentals — not just the news of the day, which can steal the market’s attention for a moment but won’t drive a stock in the long term.

The article Consumers Kept Wallets Open in July, Boosting Stocks originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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