STOCKS : IBM Results Spark Rally; Dow Rises 11.26
Prices closed mixed on Wall Street on Monday after the stock market was unable to hold on to a broad advance prompted by a better-than-expected earnings report from IBM.
The Dow Jones index of 30 industrials closed up 11.26 at 2,763.06 after having been up more than 41 points early in the session.
Declining issues ran slightly ahead of advancers in nationwide trading of New York Stock Exchange-listed stocks, with 714 up, 778 down and 510 unchanged.
Big Board volume came to 142.81 million shares, slightly higher than 142.47 million in the previous session.
The market surged at the opening after IBM reported first-quarter earnings of $1.04 billion, or $1.81 a share, up 9% from $950 million, or $1.61 a share, a year earlier. Revenue was up 11% to $14.18 billion from $12.73 billion.
The results surpassed most analysts’ predictions of earnings per share of between $1.35 and $1.70. IBM stock jumped to close up 3 3/4 at 110 7/8.
Investors moved into the market enthusiastically after hearing the news--Big Blue’s announcement dispelled some concerns that corporate profits overall for the first quarter would be disastrous. The stock market has been held in check in recent months because of anticipated weakness in corporate earnings.
The Dow Jones average was up by about 25 points for much of the day, although the broader market began to retreat. Then, in the last hour, program selling brought prices even lower.
Still, “IBM coming to the fore was the type of leadership this market was hoping for,” said Gene Jay Seagle, director of technical research at Gruntal & Co. Other technology stocks also were strong. Octel Communications jumped 4 to 23 5/8 after an Oppenheimer & Co. analyst upgraded the stock to “buy” from “hold.”
But a rise in interest rates, sparked by rumors that a Japanese investor was selling bonds, hurt many stocks, as investors decided to take profits.
Earnings reports also affected other stocks. Eli Lilly tumbled 1 1/4 to 67 1/4 after releasing first-quarter results that fell short of analysts’ forecasts. Other drug stocks fell in sympathy.
Several banking stocks fell after reporting lower first-quarter earnings. Chase Manhattan fell 1 5/8 to 27 3/4, and J. P. Morgan slipped 3/4 to 34 3/4. However, First Interstate rose 3/4 to 35 1/2, and Wells Fargo added 3/4 to 71.
Catalogue retailer Lands’ End plunged 3 3/8 to 15 1/4 after announcing that first-quarter earnings would be 8 cents to 12 cents a share versus 23 cents a year ago.
Prices on the Tokyo Stock Exchange dropped sharply in thin trading, as the dollar surged against the Japanese yen. The key 225-share Nikkei index fell 750.74 points, or 2.57%, to 28,463.18.
Financial markets were closed in Britain Monday for the Easter holiday.
CREDIT: Bond Prices Decline on Japanese Selling
Bond prices fell as Japanese investors sold long-term Treasury securities.
The Treasury’s benchmark 30-year bond declined 13/32 point, or $4.06 per $1,000 face amount. Its yield, which rises when prices fall, climbed to 8.63% from 8.59% late Thursday.
U.S. financial markets were closed last Friday for Good Friday.
James Capra, senior vice president at Shearson Lehman Government Securities Inc., said credit market participants turned their sights overseas Monday in the absence of market-moving news domestically.
He said selling of long-term U.S. securities by Japanese investors pushed prices down and triggered further selling. But he said trading overall was thin.
“We ran into Japanese selling in long bonds within the first couple of hours. That was enough to turn the market,” Capra said. “The market’s not trading a lot of volume anyway. If somebody’s selling 400 or 500 long bonds, that’s a lot.”
Prices of shorter-term Treasury notes and bonds showed smaller declines, while Treasury bill prices were mostly higher.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds closed at 91.438, unchanged from late Thursday. The average yield to maturity stayed at 7.52%.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.313%, up from 8.125% late Thursday.
CURRENCY: Dollar Makes Gains in Quiet Trading
The dollar rose against major foreign currencies in quiet post-holiday trading.
Precious metals and currency markets were closed in Europe on Friday and Monday for the Easter holiday.
The New York metals market was closed on Friday but trading resumed Monday, while currency markets in New York were open both days.
Dealers said the dollar started out strong as the market speculated the February trade data, due out Wednesday, would show improvement in the U.S. trade deficit. A strong trade report will likely strengthen the dollar on currency markets.
However, dealers said the dollar fell off its highs for the day largely on profit taking.
In Tokyo, where global trading begins, the dollar closed at 159.42 Japanese yen, up from Friday’s 158.42 yen. Later, in New York, the dollar stood at 159.30 yen, up from 158.705 yen late Friday.
In New York, one British pound cost $1.63035, down from $1.63675 Friday.
Other late dollar rates in New York, compared to late Friday’s quotes, included: 1.6778 West German marks, up from 1.6722; 1.4900 Swiss francs, up from 1.4835; 5.6365 French francs, up from 5.6195; 1,232.50 Italian lire, up from 1,230.25, and 1.16885 Canadian dollars, up from 1.1645.
Gold and silver prices declined.
On the Commodity Exchange in New York, gold bullion for current delivery closed at $375.20 an ounce, down 70 cents from late Thursday. Republic National Bank in New York quoted a late bid for gold at $374.60 an ounce, off 65 cents.
Silver fell on the Comex to $5.059 an ounce from $5.091 Thursday.
COMMODITIES: Oil Prices Rise as OPEC Session Nears
Crude oil futures prices rallied Monday on the eve of an OPEC meeting called to address the market’s recent steep declines.
Home heating oil and unleaded gasoline prices also rose in trading on the New York Mercantile Exchange.
On other markets, grain and soybean futures prices advanced; cattle and precious metals futures declined, and pork prices were mixed.
