Dow rises114 despite gloomy data
Wall Street reversed earlier losses and rallied Tuesday after IBM approved a $15-billion stock buyback, suggesting to investors that there were still some companies out there with financial muscle.
The Dow Jones industrial average rose more than 110 points.
IBM Corp., one of the 30 companies that make up the Dow, said the buyback would boost its earnings for 2008 past Wall Street’s prior forecasts. Shares of Big Blue vaulted $4.30, or 3.9%, to $114.38.
The buyback news followed two dismal economic reports showing core wholesale prices shot up more than expected last month and that consumer confidence was waning.
The reports reinforced worries that the U.S. had slipped into stagflation, a state where the economy weakens amid rising costs.
“The market is kind of overcoming negative news, which is potentially a next step toward higher prices,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “At least in the short-term, it’s a nice change here.”
Tuesday’s advance extended a rally that began Monday when Standard & Poor’s affirmed the AAA ratings for troubled bond insurers Ambac Financial Group Inc. and MBIA Inc. MBIA, which on Tuesday said it would eliminate its quarterly dividend, was also affirmed by Moody’s Investors Service.
The Dow jumped 114.70 points, or 0.9%, to 12,684.92, after declining in earlier trading.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 9.49 points, or 0.7%, to 1,381.29, and the Nasdaq composite index rose 17.51 points, or 0.8%, to 2,344.99.
The Russell 2,000 index of smaller companies rose 6.86 points, or 1%, to 717.32.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange.
Yields on government bonds fell. The benchmark 10-year Treasury note’s yield slipped to 3.86% from 3.9% late Monday.
The dollar was mixed against most other major currencies, while gold prices edged higher.
Tuesday’s economic reports were decidedly downbeat.
The Conference Board’s index of consumer confidence plunged in February to 75 from a revised 87.3 in January. The reading was the lowest since the index registered 64.8 in February 2003, and came in far below the average of estimates by analysts. Though the report is not a perfect predictor of consumer spending, it suggests Americans are watching their budgets.
Meanwhile, the latest wholesale inflation report showed the producer price index rising by a full 1% in January, driven up by higher energy prices and soaring food costs.
The result was a bit below the 1.1% advance projected by economists surveyed by Thomson/IFR, but “core” producer prices -- which exclude food and energy -- rose 0.4%, steeper than the predicted 0.3% gain.
“The market is holding up extraordinarily well given all this negative stuff,” said Scott Fullman, director of investment strategy for I.A. Englander & Co.
He called the prospect of more corporate buybacks a “positive for the market,” but added, “The market is tired of going down.”
Cementing the belief that costs won’t be easing any time soon was oil’s surge back above $100 a barrel. Crude futures rose $1.65 to $100.88 a barrel on the New York Mercantile Exchange.
Positive news from some retailers helped keep stocks afloat.
Target said fourth-quarter profit fell because of lagging holiday sales and a quirk in the earnings calendar, but the earnings exceeded the average forecast. Shares of the discount chain rose $1.64, or 3.1%, to $54.89.
Rite Aid jumped 17 cents, or 6.5%, to $2.78 after an analyst upgraded the pharmacy chain and said a recent drop in the stock made it attractive.
RadioShack soared $3.39, or 22%, to $19.13 after the electronics retailer posted a higher fourth-quarter sales than analysts predicted.
In other market highlights:
Tenet Healthcare surged 62 cents, or 14%, to $4.90. The hospital operator said its fourth-quarter loss narrowed sharply thanks to new contracts, higher admissions and cost cutting.
Overseas, key stock indexes jumped 1.5% in Britain and Germany, rose 1.1% in France and fell 0.6% in Japan.
