Wall Street Shakes Off Drop From IBM Warning
Wall Street shook off an earnings warning from IBM on Monday, recovering from a steep early drop to close mostly higher.
The Dow industrials, which include IBM, sank as much as 151 points at the start of trading, but regained most of the loss by the close.
The Dow finished off 22.56 points, or 0.2%, at 10,249.08.
Most broader stock indexes ended with modest gains. The Standard & Poor’s 500 edged up 0.2%. The technology-dominated Nasdaq composite rose 15.84 points, or 0.9%, to 1,785.87.
Winners topped losers by 18 to 13 on the New York Stock Exchange and by 19 to 16 on Nasdaq.
Initially, IBM’s outlook came as a blow to investors who had hoped that companies would post respectable first-quarter results and offer upbeat forecasts. But as the session progressed some investors appeared to view IBM’s warning as more of an isolated event. Rumors of a downbeat forecast from IBM began circulating Friday.
What’s more, the decline in share prices over the last three weeks--particularly in the tech sector--may already have “discounted” disappointment in first-quarter results, analysts said.
The Nasdaq index fell 8.2% from March 11 to Friday.
Citing a difficult business climate, IBM said it expects first-quarter earnings to be 66 cents to 70 cents a share, below the 85 cents Wall Street anticipated.
The computer giant’s shares plummeted $9.84, or 10%, to $87.14. But the stock’s slump was mostly offset by other shares in the 30-stock Dow.
3M, for example, gained $1.70 to $123.63 on the heels of its upbeat earnings forecast last week. United Technologies jumped $1.15 to $73.95 amid another broad rally in defense-related shares after Iraq said it would suspend oil shipments for a month, to protest the conflict between Israel and the Palestinians.
In the bond market, Treasury yields rose modestly. Yields slid last week as some investors looked for a safe haven in light of the Middle East situation. The 10-year T-note yield rose to 5.26% on Monday from 5.21% on Friday.
On Wall Street, expectations overall aren’t high for first-quarter earnings: Analysts surveyed by Thomson Financial/First Call expect that profits for the S&P; 500 companies will fall 9.2% in the first quarter from a year earlier.
More important than the actual results, experts say, will be the forecasts companies offer for the rest of the year, reflecting the economy’s recovery.
First-quarter earnings reports are expected to dominate the news on Wall Street starting this week.
Among Monday’s market highlights:
* Major tech stocks gaining ground despite IBM’s warning included Oracle, up 21 cents to $12.34; Microsoft, up $1.35 to $57.22; Dell Computer, up 46 cents to $26.88; and Cisco Systems, up 3 cents to $16.18.
But Intel lost 12 cents to $29.93 and Sun Microsystems fell 21 cents to $8.50.
* Retail stocks continued to rebound from a recent sell-off. Target gained $1.30 to $43.66, Home Depot added 73 cents to $49.50 and Wet Seal jumped $2 to $38.60.
* Energy stocks rose as crude oil prices climbed in the wake of the Iraqi announcement. Exxon Mobil gained 61 cents to $43.24, ChevronTexaco jumped $1.26 to $88.40 and Kerr McGee surged $1.37 to $61.25.
* The rally in defense shares lifted Alliant Techsystems $2.02 to $107.61, Integrated Defense Technologies $1.35 to $30.25 and Ducommun $1.49 to $19.74.
Market Roundup, C7-8
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