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Stocks lift after IBM OKs buyback; investors still cautious after disappointing economic data

Stocks lift after IBM OKs buyback; investors still cautious after disappointing economic data

Wall Street reversed earlier losses and rallied Tuesday after IBM approved a $15 billion (euro10.08 billion) stock buyback, suggesting to investors that there are still some companies out there with financial muscle.
The buyback news followed two dismal economic reports showing core wholesale prices shot up more than expected last month and that consumer confidence is waning. The data together reinforced worries that the United States is suffering from stagflation, a state when 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."
IBM, after approving the $15 billion buyback, rose $3.10, or 2.8 percent, to $113.18. The technology company, one of the 30 companies that make up the Dow Jones industrials, said the buyback will boost its earnings for 2008 past Wall Street's prior forecasts.
The IBM buyback followed two big acquisition offers Monday _ Getty Images Inc.'s $2.1 billion buyout from a private equity group, and Take-Two Interactive Software Inc.'s buyout offer by Electronic Arts Inc.
"When people are willing to buy companies, and willing to buy back their shares, these are positive, fundamental drivers," Detrick said.
In midday trading, the Dow Jones industrial average rose 130.17, or 1.04 percent, to 12,700.39, after declining in earlier trading.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 11.92, or 0.87 percent, to 1,383.72, and the Nasdaq composite index rose 25.07, or 1.08 percent, to 2,352.55.
Government bonds rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.88 percent from 3.91 percent late Monday.
The Conference Board's index of consumer confidence plunged in February to 75.0 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 analysts' average estimate. 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 headline producer prices rising by a full 1 percent in January, driven up by higher energy prices and soaring food costs.
The result was a bit below the 1.1 percent advance projected by Thomson/IFR, but core PPI _ which excludes food and energy prices _ rose 0.4 percent, steeper than the predicted 0.3 percent gain. The data was disconcerting because the Federal Reserve is known to closely monitor core-level inflation in setting monetary policy.
"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 said the prospect of more corporate buybacks was a "positive for the market," but also, "the market is tired of going down."
Positive news from some retailers helped keep stocks afloat.
Target Corp., the discount store chain, said fourth-quarter profits fell due to poor holiday sales and a quirk in the earnings calendar, but results came in above the average forecast. Target rose $1.87, or 3.5 percent, to $55.12.
RadioShack Corp. rose after the electronics retailer posted a rise in fourth-quarter profit and higher sales than analysts predicted. RadioShack rose $2.79, or 17.7 percent, to $18.53.
In other corporate news, Tenet Healthcare, the hospital operator, said its fourth-quarter losses narrowed sharply thanks to new contracts, higher admissions and cost-cutting. Tenet rose 57 cents, or 13 percent, to $4.85.
Rite Aid Corp. also jumped, after an analyst upgraded the pharmacy chain and said a recent stock drop makes its risk and reward profile more favorable. Rite Aid rose 26 cents, or 10 percent, to $2.87.
The dollar fell against most other major currencies. Gold prices edged higher. l


Updated : 2021-03-09 12:57 GMT+08:00