U.S. Stocks Rally On Big Blue's Brightened Outlook
NEW YORK (MarketWatch) -- U.S. stocks surge on Tuesday after IBM Corp. hiked its outlook and said it would buy back $15 billion of its stock, helping offset earlier pressure brought on by surging inflation and declining consumer confidence.
"All this bad news should be adding up to a triple-digit loss for the Dow, but there is already a lot of bad news priced into the market, and you get to the point where you price in enough bad news and you get to have an opposite day," said Art Hogan, chief market strategist at Jefferies & Co. .
After falling early on, the Dow Jones Industrial Average switched gears, climbing 124.72 points to 12,694.94, with 25 of its 30 components posting gains.
The blue-chip advance was led by IBM , up more than 4% after the tech giant raised its 2008 earnings forecast due to the positive impact of a $15 billion stock buyback plan. .
Energy stocks reversed course along with the overall market as oil topped $101 a barrel for the first time, with crude hitting $101.11 a barrel on the New York Mercantile Exchange, and more recently trading up $1.57 at $100.80 a barrel. .
Blue-chip laggards included Boeing Co. , General Electric Co. , Bank of America Corp. and Microsoft Corp. , all off less than 1%.
The S&P 500 gained 11.20 points to 1,383.00, while the technology-heavy Nasdaq Composite rose 24.49 points to 2,351.97.
The dollar withered, with an index measuring the greenback against six major currencies at 75.05, off from 75.498 in late U.S. trade on Monday.
Volume on the New York Stock Exchange came to 656 million, with advancers passing decliners 3 to 1. On the Nasdaq, 503 million shares traded, with advancing issues outrunning those declining, 2 to 1.
Ahead of the opening bell, the Labor Department said escalating energy and food prices fueled a 1% climb in the January producer price index. The core PPI, which excludes food and energy, rose 0.4%, above the anticipated 0.3%. .
"Ongoing strength in headline inflation and the continued upward drift in core rates should keep the (Federal Open Market Committee) hobbled by inflation risk, despite the greater focus at the Fed on downside economic risk," said analysts at Action Economics.
Other Tuesday data had Standard & Poor's reporting U.S. home values fell 8.9% in 2007, the largest drop in 20 years. .
Target off-target
Target pointed to a weakening economy as its fourth-quarter earnings fell to $1.03 billion from $1.12 billion in the year-ago period.
In other earnings, Home Depot reported a 27.5% profit fall a day after smaller rival Lowe's unveiled a 33% profit fall. Home Depot expects 2008 adjusted earnings per share to fall as much as 24% on a 5% sales fall.
Office Depot reported a 85% profit fall, and broadcaster CBS Corp. said its profit dropped 15%.
Foster Wheeler fell nearly 8% as its 24% profit rise didn't meet analyst estimates and the engineering firm reported a decline in margins.
Electronics retailer RadioShack reported a 20% profit rise.
Merrill Lynch & Co. Inc. restated its cash flows for fiscal 2005 and 2006, and said the restatements were the result of errors that offset each other. Separately, the bank fired two private bankers in Asia due to "policy breaches."
Shares of Google Inc. fell 6.4% in the wake of a late Monday comScore report showing lower paid-click search rates for the online search giant.
In overseas trade, European shares climbed for a second session, with financial stocks fronting the climb. .
A key gauge of German business climate unexpectedly improved in February.
In Asia, stocks closed on a mixed note after a volatile session that had indexes in Tokyo, Shanghai, Seoul, Singapore, Taipei, Jakarta and Bangkok waver between negative and positive territory. .
By Kate Gibson