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Wall St. overcomes IBM
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October 21, 1999: 5:01 p.m. ET
Stocks recover from an early sell-off, Nasdaq manages to post gain
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NEW YORK (CNNfn) - Wall Street recovered from a deep dive Thursday as a late-session buying binge helped to offset a profit warning from Dow component IBM.
The Dow Jones industrial average recovered from a loss of more than 200 points to close 94.67 points lower at 10,297.69. On the New York Stock Exchange, losers still finished ahead of gainers 1,854 to 1,178 on trading volume of 986 million shares.
IBM, which issued a profit warning late Wednesday, was the big culprit for the blue chip index, contributing about 105 points to the Dow's decline. In fact, had it not been for Big Blue's woes, the Dow would have closed in positive territory.
The Nasdaq composite index overcame its morning slide and managed to finish 13.82 points higher at 2,801.95. The S&P 500 index lost 5.82 points to 1,283.61.
Buyers emerged from the sidelines in the last hour of trading, focusing largely on financial, pharmaceutical, Internet and blue chip technology stocks other than IBM, most of which were supported by strong earnings in their respective sectors.
Bonds retreated under the weight of fresh supply of corporate debt after Ford Motor Co. priced a $5 billion issue. The stock market's late recovery added pressure on the market. The market had risen earlier when the European Central Bank opted to leave interest rates unchanged. The benchmark 30-year Treasury bond fell 10/32 of a point in price, its yield rising to 6.35 percent from 6.33 percent late Wednesday.
The dollar fell against both the yen and the euro.
IBM results rattle techs, broad market
In the stock market, investors initially sold blue-chip technology stocks they had bought in the previous day's rally. The sell-off came after sector leader IBM (IBM) issued profit warnings for the fourth quarter of 1999 and the first quarter of 2000.
Shares of Big Blue plunged 15-5/8, or nearly 15 percent, to 91-3/8, driving the Dow industrials sharply lower. Several brokerages downgraded the stock. Among them, Lehman Brothers lowered its rating of the company to "outperform" from "buy," and Merrill Lynch downgraded IBM to "near-term neutral" from "near-term buy."
IBM's woes spread throughout the technology sector in the morning, before discriminating buyers stepped in late in the day, buying the shares of companies which had reported strong earnings.
Hewlett Packard (HWP), the other Dow technology component, lost 1-9/16 to 75.
On the Nasdaq, Microsoft (MSFT), whose own strong earnings helped fuel Wall Street's rally Wednesday, saw its shares rise 13/16 to 93-1/16. Cisco Systems (CSCO) eased 3/4 to 69-3/16, and Dell Computer (DELL), which two days earlier issued a profit warning of its own, lost 1/2 to 39-1/2. But Intel (INTC) gained 1-3/4 to 71-11/16.
Also on the positive side shares of made-to-order computer firm Gateway (GTW) rallied 10, or more 19 percent, to 62 after the company's third-quarter earnings of 1 cent a share came in ahead of Wall Street predictions. A strategic alliance with America Online (AOL) also helped propel Gateway's stock higher. The two companies are to co-brand and distribute each other's products, and share profits from the arrangement.
AOL's shares rose 4-5/16 to 122-5/16 after the online service provider late Wednesday reported stronger-than-expected fiscal first-quarter results.
Non-tech earnings mostly strong
Earnings from several of the Dow's non-technology components came in largely ahead of expectations, lifting the underlying stocks and helping cushion the blue-chip index's fall.
Among the positive surprises, pharmaceutical powerhouse Merck (MRK) reported a 13 percent jump in net profit in the third quarter, matching analysts' expectations. The stock gained 2-15/16 to 78-5/8.
Meanwhile, soft-drink titan Coca Cola (KO) registered an 11-percent decline in third-quarter profit but still matched lowered market forecasts; the stock jumped 1-9/16 to 54-5/16.
Finally, Dow retail component Sears Roebuck (S) saw its stock retreat 7/8 to 28-1/8 after reporting third-quarter profit that beat analysts' estimates, even though it was 10 percent lower than in the same quarter a year earlier.
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