Alexa

Dow ends higher after IBM OKs buyback, offsetting economic data disappointment

Dow ends higher after IBM OKs buyback, offsetting economic data disappointment

Wall Street reversed earlier losses and rallied Tuesday after IBM approved a US$15 billion stock buyback, suggesting to investors that there are 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 will boost its earnings for 2008 past Wall Street's prior forecasts. Shares of Big Blue vaulted US$4.30, or 3.9 percent, to US$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 is waning. The data 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."
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 rose 114.70, or 0.91 percent, to 12,684.92, after declining in earlier trading.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 9.49, or 0.69 percent, to 1,381.29, and the Nasdaq composite index rose 17.51, or 0.75 percent, to 2,344.99.
Government bonds rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.86 percent from 3.91 percent late Monday. The dollar was mixed against most other major currencies, while gold prices edged higher.
Meanwhile, the latest wholesale inflation report showed the headline producer price index 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.
Cementing the belief that costs won't be easing anytime soon was oil's surge back above US$100 a barrel. Light, sweet crude rose US$1.65 to US$100.88 a barrel on the New York Mercantile Exchange.
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 US$1.64, or 3.1 percent, to US$54.89.
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 17 cents, or 6.5 percent, to US$2.78.
RadioShack Corp. rose after the electronics retailer posted a rise in fourth-quarter profit and higher sales than analysts predicted. RadioShack rose US$3.30, or 21.5 percent, to US$19.13.
The Russell 2000 index of smaller companies rose 6.86, or 0.97 percent, to 717.32.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 1.53 billion shares.


Updated : 2021-02-25 22:28 GMT+08:00