Wall Street cheers Big Blue earnings

NEW YORK (CNNMoney.com) -- Stocks edged to session highs Monday afternoon as strong earnings from IBM boosted technology stocks and anticipation of a Fed interest rate cut encouraged investors to buy equities.

The Dow Jones industrial average (INDU) rose 1.4 percent about with two hours left the session. The broader S&P 500 (INX) index was up 1.1 percent and the Nasdaq (COMPX) composite climbed more than 1.7 percent.

Technology blue-chip IBM said early Monday that earnings for the fourth quarter will be higher-than-expected based largely on overseas sales. The company said it expects fourth-quarter earnings of $2.80 a share, compared to analysts expectations of $2.60 a share.

IBM will officially report earnings Thursday.

"The IBM news definitely gave the market a catalyst," said Quincy Krosby, chief investment strategist at The Hartford.

Other technology companies, including Apple (AAPL, Fortune 500)., Intel (INTC, Fortune 500) and Dell (DELL, Fortune 500) traded higher on the IBM news.

Also supporting stocks was a report from Credit Suisse that put the U.S. equity market in the "overweight" category, Krosby said.

Dow Jones Newswires reported Monday that analysts at Credit Swisse moved U.S. stocks to a 5 percent overweight weighting from benchmark and downgraded European stocks to underweight based on the European Central Bank's reluctance to cut interest rates.

"There is a view that the U.S. market will see a boost from Fed accommodation and a possible stimulus package from Washington," she said.

Talk of an economic recession in the United States has many on Wall Street betting that the Federal Reserve will cut rates by at least a half-percentage point Jan. 30 at the end of its scheduked two-day meeting.

Likewise, growing concerns about economic softness have fueled speculation that the federal government will introduce a plan to stimulate economic activity.

Commodities were also active in Monday's session. Gold futures reached an all time intra-day high of $915.90 before settling at $903.80 an ounce in New York.

The precious metal's rally lifted shares of gold producer Yamana Gold (AUY) nearly 5 percent in afternoon trading.

In other corporate news, department store operator Sears Holdings (SHLD, Fortune 500) warned Monday that it expects fourth-quarter earnings to be weaker-than-expected due to slow same-store sales growth. Shares of the company were down more than 5 percent in afternoon trading.

Investors are bracing for more bad news from the financial sector this week.

Citigroup (C, Fortune 500), the world's largest bank, is expected to to take a giant writedown when it reports its fourth-quarter results Tuesday. Separately, a report in The Wall Street Journal Monday said the Chinese government is voicing opposition to Citi's plan to sell a $2 billion stake to China Development Bank.

Merrill Lynch (MER, Fortune 500) is also expected to report a writedown when it releases earnings Thursday. Making matters worse for the Wall Street fixture, the Journal reported Monday that Merrill is facing a Securities and Exchange Commission investigation over improper trading by a handful of current and former employees.

Market breadth was positive. On the Dow winners beat losers by roughly two to one on a volume of 998 million shares. On the Nasdaq, advancers beat decliners by about three to two on a volume of 1.67 billion shares.

Treasury prices rose, with the yield on the 10-year note falling to 3.78 percent, from 3.80 percent late Friday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar fell versus the yen and the euro.

U.S. light crude oil for February delivery rose $1.55 to $94.24 a barrel on the New York Mercantile Exchange.

COMEX gold for February delivery spiked $6.10 to $903.80 an ounce, an all-time record high, on the weakening U.S. dollar.