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Big day for blue chips
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October 21, 1997: 5:13 p.m. ET
Stock market rallies on IBM, Microsoft and bank earnings
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NEW YORK (CNNfn) -- Blue chips and broader markets charged ahead Tuesday as investors responded to strong earnings from key technology and financial issues.
The Dow Jones industrial average closed up 139.00 points at 8,060.44. Component IBM (IBM) rallied 7-11/16 to 105-3/16 in reaction to a quarterly profit reported late Monday that topped estimates, while fellow blue chips J.P. Morgan (JPM) rose 3-3/4 to 122-1/2 and Merck (MRK) gained 2-3/8 to 122-1/2.
IBM helped ignite a buying spree across Wall Street. At the close, key markets all posted sharp gains. The S&P 500 index climbed 16.67 to 972.28 and the American Stock Exchange index gained 5.78 to 712.36. The Nasdaq Composite -- powered by Microsoft's (MSFT) 6-point rise to 138-1/2 on a better-than-expected quarterly profit -- finished 27.09 higher at 1,712.54.
The Dow Jones transportation average posted a gain of 85.65 to 3,368.33 -- equal to a 2.61 percent rise -- on continued strength in AMR (AMR), up 3-1/16 to 123-7/16, Delta Air Lines (DAL), up 1-13/16 to 107-5/16, and Northwest Airlines (NWAC), up 1-5/8 to 49-1/8. Northwest turned in a quarterly profit of $2.51 a share against a $2.15 forecast.
On the New York Stock Exchange, advances beat declines, 1,947 to 907, as volume topped 587 million shares.
"If you look at the IBMs of the world, they're having a good day," said Don Hays, strategist at Wheat First Butcher Singer. "But I don't know if it's more than a one-day bounceback after some consolidation. It will be important what happens in the ensuing days."
Traders gobbled up shares that wilted under pressure last week when a small number of influential companies sparked worries that the fourth-quarter would disappoint the market. In typical Ping-Pong fashion, the market overlooked those sentiments and charged ahead on strong results from a variety of issues.
"I think, on balance, earnings are up between 13 and 14 percent on revenue growth of about 8 percent," said Vincent Farrell, chief investment officer at Spears, Benzak, Salomon & Farrell. "That's nice, very healthy, but not something to start a brand new leg of the bull market on."
Financial stocks posted some of the most impressive surges. Chase Manhattan (CMB) rose 2-1/8 to 123-11/16 after smashing through projections with a profit of $2.26 per share, while Citibank (CCI) climbed 5-5/16 to 144-3/16 as a 45 percent drop in profits to $2.19 a share still came in above estimates. The bank announced plans to cut 7,500 jobs as part of a restructuring.
Other gainers included Wells Fargo (WFC), which barreled ahead 22-5/16 to 314 on a $3.26 quarter profit that beat expectations along with plans to repurchase 10 percent of its stock.
Exxon (XON) -- having gained 1-3/8 ahead of earnings -- edged up 1/8 to 65-1/8 as net income rose 17 percent to 74 cents a share, while Texaco (TX) slipped 9/16 to 61-1/16 even though earnings came in well above estimates at 91 cents a share. Like Exxon, Texaco closed sharply higher Monday.
Software maker Citrix Systems (CTXS) climbed 14-1/4 to 74-5/8 after earnings per share surged 13 cents above the projections to 44 cents, but Cadence Design Systems (CDN) fell 3-3/4 to 52-1/8. The engineering software maker said its chief executive, a man credited with much of the company's success, resigned to pursue a career in education technology. Hambrecht & Quist repeated a "buy" recommendation on the stock.
Meanwhile, shares of online bookseller Amazon.com (AMZN) rallied 7-1/4 to 53-1/8 on word that the company settled a lawsuit with rival Barnes & Noble. Neither side admitted wrongdoing. Barnes & Noble (BKS), which had accused Amazon of false advertising, rose 13/16 to 27-7/8.
-- by staff writer David Rynecki
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