NEW YORK >> Wall Street shook off a profit and revenue warning from IBM today, bouncing back from a sharp early drop as investors regained their confidence about a business turnaround. Blue chips declined modestly while tech shares managed a solid gain. Nasdaq rises, Dow pares
loss after IBM warningBy Amy Baldwin
Associated Press"IBM gave us bad news, but that doesn't mean all of Corporate America is going to do the same," said Arthur Hogan, chief market analyst at Jefferies & Co.
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 analysts said the market rebounded as investors first decided IBM's troubles were not industrywide and then were enticed by the market's lower prices following three weeks of strong selling.
The Dow Jones industrial average closed down 22.56 at 10,249.08, rebounding from an earlier loss of 150.01. The bulk of the Dow's decline was due to IBM.
The broader market finished higher. The tech-dominated Nasdaq composite index rose 15.84 to 1,785.87, recovering from a loss of 36.19 earlier in the day. Analysts attributed lower prices for Nasdaq issues for the modest upturn. The Nasdaq fell 1.8 percent last week and to a yearly loss of 9.2 percent.
The Standard & Poor's 500 index advanced 2.56 to 1,125.29.
Advancers outnumbered decliners 18 to 13 on the New York Stock Exchange, with 1,830 up, 1,335 down and 174 unchanged. Volume was l.09 billion shares.
The NYSE composite index rose 0.88 to 591.64, the American Stock Exchange composite index gained 5.84 to 904.45 and the Russell 2000 index advanced 5.26 to 503.02.
The Treasury's 2-year note slipped 1/32 to 100 1/4; its yield rose 2 basis points to 3.49 percent. The 10-year note fell 932 to 97 632; its yield gained 4 basis points to 5.24 percent. The 30-year bond fell 1732 to 95 11/32; its yield rose 4 basis points to 5.70 percent.
The Dow's biggest loser was IBM, which fell $9.84 to $87.41 after lowering its first-quarter earnings and revenue estimates. IBM accounts for 6 percent of the Dow and accounted for all of the index's drop.
Analysts said IBM's warning wasn't entirely a surprise, which was why most of the market's decline was confined to IBM by afternoon. Rumors of the warning hit Wall Street Friday, but many analysts and professional investors had been expecting it for several quarters, said John C. Forelli, portfolio manager for Independence Investment LLC in Boston. Forelli noted that IBM had a history of modest revenue but double-digit profits that could not be sustained.
"Eventually, you have to figure that will run out," Forelli said.
Citing a difficult business climate, IBM now expects first-quarter earnings to be 66 cents to 70 cents a share, below the 85 cents Wall Street anticipated.
"The business environment remains very tough. We saw a continued slowdown in customer buying decisions in the first quarter," said John R. Joyce, IBM senior vice president and chief financial officer, in a news release.
But other tech companies advanced today after saying business was turning around.
Intuit climbed $2.77 to $40.07 after the maker of tax software raised its fiscal third-quarter forecast. Computer Associates, which makes software for Web businesses, gained 83 cents to $20.73 after saying its fiscal fourth-quarter loss will be smaller than previously expected.
Elsewhere, Merck fell $1.09 to $54.16, but 3M, which raised its first-quarter outlook Friday, advanced $1.70 to $123.63.
Investors have unloaded shares for three weeks amid concerns about first-quarter results, which companies are in the process of releasing, and fears that conflict in the Middle East could disrupt oil production and lead to higher prices.
Indeed, Iraq announced today it was suspending oil exports for one month, which explained why oil stocks advanced today. ExxonMobil rose 61 cents to $43.24.