IBM leads revival in technology stocks Three-week slide appears to be over

Dow is up 67 points

July 26, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks surged yesterday as International Business Machines Corp. rose 13 percent, more than on any day since at least 1980. Unexpectedly strong earnings at the No. 1 computer maker helped revive dozens of the industry's stocks.

IBM executives backed up Compaq Computer Corp.'s forecast Wednesday of a stronger second half. After a three-week slide in semiconductor, software and computer companies, investors cheered the upbeat news.

The Dow Jones industrial average soared almost 77 points, ceded about half that and rallied to 5,422.01, up 67.32. IBM, up $11.75, to $103.50, accounted for 36 points of the average's gain.

IBM said it earned $2.51 a share in the second quarter as its personal computer sales were the best in three years.

The Dow industrials have skidded more than 6 percent and the S&P 500 almost 7 percent since reaching records in May. IBM-rivals Motorola Inc. and Hewlett-Packard Co. helped to raise hackles after the two said prices were falling and sales were slowing.

They benefited a bit from yesterday's rally. Motorola rose 62.5 cents, to $53.125, while Hewlett-Packard rose 12.5, cents to $43.75.

IBM's earnings came on the heels of strong quarterly reports from chip-maker Intel Corp. and software giant Microsoft Corp. in the past couple weeks. Intel rose $3.125, to $72.125, Microsoft gained $3.75, to $118.50 and Sun Microsystems Inc., a seller of hardware and software, rose $2.50, to $52.625.

The Nasdaq index, harboring some of the most downtrodden stocks, sprinted 20.02, or 1.9 percent, to 1,062.39.

The Nasdaq composite index has dropped 15 percent from its June 5 high and is ahead less than 1 percent for 1996.

Gains in computer-system, software and semiconductor companies pushed up the Standard & Poor's 500 index 4.52, to 631.17. Advancers outnumbered decliners on the New York Stock Exchange by 1,531, to 830.

Stocks retreated from earlier highs as bonds ceded gains, raising concern that borrowing costs could deplete profit growth.

The yield on the benchmark 30-year Treasury bond rose to 7.01 percent from 6.98 percent earlier, still lower than Wednesday's closing mark of 7.04 percent. Government bonds serve as a benchmark for corporate loan rates.

The Russell 2000 index of smaller shares rose for the first time in a week, adding 3.81, to 311.58. The Wilshire 5000 climbed 64.66, to 6164.01.

Disappointing profits still dogged some companies.

Digi International Inc., a maker of data-transmission equipment, said it earned 13 cents a share, well below the same quarter last year and analysts' estimates. Its shares fell $3.125, to $12.

Charter Power System Inc., a maker of industrial lead-acid batteries, tumbled $10, to $18. Its stock fell after the company said earnings would be about 35 cents for the fiscal second quarter, 40 percent below year-earlier figures and 56 percent under estimates.

U.S. Robotics Corp. shares tumbled after the computer modem company said this quarter's revenue wouldn't match last quarter's 20 percent rise. The company reported Wednesday after the close of trading that revenue for the fiscal third quarter more than doubled from year-earlier numbers and beat analysts' estimates. U.S. Robotics fell $11.484375, to a 52-week low of $54.515625 in trading of 17.2 million shares, making it the most active stock in U.S. markets yesterday.

Browning-Ferris Industries Inc., whose shares trade on the New York Stock Exchange, dropped $1.875, to $23.125 after the company said net income fell 42 percent for the fiscal fourth quarter to 31 cents a share. Analysts in a Zacks Investment Research poll expected the waste-disposal company to earn 40 cents on average. McKesson Corp., a drug and beauty supply distributor, said its earnings fell 6 percent to 66 cents a share. Its shares fell $1.125, to $41.50.

Pub Date: 7/26/96

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