AP
January 14, 2008
NEW YORK - Wall Street advanced sharply Monday, with solid preliminary results from IBM encouraging investors to buy back into the stock market after last week’s rout.
International Business Machines Corp., one of the 30 Dow Jones industrials, released preliminary earnings estimates for the fourth quarter that were 24 percent above year-earlier levels and that also beat the forecast of analysts surveyed by Thomson Financial.
But the badly beaten financial sector could be in for more pain, after reports over the past week that Citigroup Inc. may have to take a larger-than-feared writedown; the bank’s earnings report is due Tuesday.
Elsewhere in the sector, Merrill Lynch & Co. Inc. is seeking $4 billion, in a second capital raising to stanch the losses on its balance sheet, according to the Financial Times. The Kuwait Investment Authority could invest as much as $3 billion in the deal, which could be announced by the middle of the week.
In midmorning trading, the Dow gained 89.50, or 0.71 percent, to 12,695.80.
Broader stock indicators also rose. The Standard & Poor’s 500 index added 6.52, or 0.47 percent, to 1,407.54 and the Nasdaq composite index shot up 21.43, or 0.88 percent, to 2,461.37.
With no major data reports on the calendar, investors are expected to focus on corporate and commodities news. Overnight in overseas trading, gold futures hit a record, venturing above $913 an ounce after the dollar tumbled against other major currencies. The euro reached a new high above $1.49.
Other commodities were higher, too. Crude oil futures rose 91 cents to $93.60 a barrel on the New York Mercantile Exchange.
Treasurys were trending slightly higher in early dealings. The yield on the benchmark 10-year Treasury note was 3.79 percent, down from 3.81 percent on Friday. Prices and yields trade in opposite directions.
In corporate news, General Motors Corp. Chief Financial Officer Fritz Henderson said that although the GMAC finance wing’s auto loan delinquencies were up slightly in the third quarter from year before levels, the problems for auto loans were not nearly as severe as the credit troubles in the real estate sector. GM sold control of GMAC in 2006 but still owns a large minority stake. GM rose 9 cents to $23.59.
Sears Holdings Corp. warned that its upcoming fourth-quarter report could show a decline as high as 51 percent from year-earlier levels, adding to concerns that economic weakness is slowing the retail sector. The company Monday forecast a result of $2.59 to $3.48 a share, which would be down from $5.33 a year before and a Thomson Financial forecast of $4.43 a share. Sears fell $8.64, or 9 percent, to $87.54.
Stocks sold off sharply last week after a chorus of Wall Street economists predicted the U.S. is about to slide into a recession. The Dow lost 1.51 percent during the week, the S&P 500 index dropped 0.75 percent and the Nasdaq gave up 2.58 percent. However, a recession cannot be declared until there are two quarters in a row of economic shrinkage as measured by gross domestic product data and that has not occurred yet.
At the same time, the talk of economic weakness and recent pointed remarks by Federal Reserve Chairman Ben Bernanke have convinced investors the central bank will cut rates later this month. The expectation of cheaper money also bolstered sentiment Monday. The Fed’s monetary policy committee will meet Jan. 29-30.
Advancing issues outnumbered decliners by about 9 to 5 on the New York Stock Exchange, where volume came to 147.4 million shares
The Russell 2000 index of smaller companies rose 3.35, or 0.48 percent, to 708.00.
Overseas, the Tokyo stock market was closed for a holiday Monday. In Europe London’s FTSE 100 rose 0.70 percent, Germany’s DAX advanced 0.41 percent and Paris’ CAC 40 gained 0.80 percent.
Source: BostonHerald
Wall Street rises sharply in early trading after IBM results lift hopes
