IBM Earnings Spark Rally; Dow Jumps 67
Stocks staged their first big rally in five sessions on Thursday, powered by some better-than-expected corporate earnings reports.
The Dow industrials zoomed 67.32 points, or 1.3%, to 5,422.01, with a huge leap in IBM shares responsible for much of the gain.
In the broad market, winners topped losers by nearly 2 to 1 on the New York Stock Exchange and on Nasdaq. The Nasdaq composite index of mostly smaller stocks jumped 20.02 points, or 1.9%, to 1,062.39, its best gain in a week.
Analysts said the market was primed for a rebound after four days of heavy selling, the latest in a wave of profit-taking that has forced share prices down sharply since early July.
IBM sparked the rally with its earnings and relatively upbeat outlook on the second half. “IBM did a good job of lifting market psychology of technology stocks,” said Hildegard Zagorski, analyst at Prudential Securities.
The tech sector has led the market lower this month, after some disappointing profit reports from companies such as Motorola and Hewlett-Packard.
IBM’s better-than-expected report followed Compaq Computer’s strong earnings report on Wednesday.
Meanwhile, the bond market provided a benign backdrop for stocks, as yields eased on news that orders for big-ticket durable goods and sales of existing homes both declined in June, possibly portending slower economic growth.
The 30-year Treasury bond yield fell to 7.01% from 7.04%.
Still, analysts warned against concluding that the stock market’s woes are over.
“Anything that’s not quite so negative is going to cause [stocks] to bounce” after they’ve been sold so heavily, said Jon Hickman, portfolio manager at Wells Fargo Investment Management Group.
“We need a decline in bond yields to return to sustained share price appreciation,” said Jim Solloway, director of research at Argus Research Corp. in New York.
Among Thursday’s highlights:
* IBM rocketed 11 7/8 to 103 5/8 on its earnings report. Compaq rose 3 5/8 to 51 7/8 after jumping 3 1/4 on Wednesday.
Other tech winners included Intel, up 3 1/8 to 72 1/8; Cabletron Systems, up 3 5/8 to 59 1/8; and Seagate, up 4 to 44 3/8. Also, Western Digital leaped 3 to 26 3/4 on upbeat earnings, and Xerox gained 3 7/8 to 50 3/8 on its profit report.
* On the downside, disappointing earnings pushed Charter Power down 10 to 18, and Browning-Ferris down 1 7/8 to 23 1/8.
* Some industrial shares gained, with DuPont up 2 to 79 1/4, Union Carbide up 2 1/8 to 39 5/8 and Reliance Steel up 1 7/8 to 35 1/2.
In foreign trading, Tokyo’s Nikkei-225 index gained 1.2% but Mexico City’s Bolsa index closed off marginally despite U.S. stocks’ rally.
