By Chris Dieterich And Saumya Vaishampayan
U.S. stocks rose for a second day in a row on Monday, though
downbeat earnings from International Business Machines Corp. kept a
lid on gains for Dow industrials.
The Dow Jones Industrial Average added 19.26 points, or 0.1%, to
16399.67, closing near the day's highs. Gains for the Dow were
slim, however because of IBM, which tumbled $12.95, or 7.1%, to
$169.10 after the company's quarterly profit and revenue fell,
missing expectations.
The Dow is a price-weighted average of its 30 components,
meaning that pricier stocks carry more sway in its up or down
moves. IBM's decline alone resulted in an 83-point drag for the
blue-chip benchmark, which rallied back from a decline of as many
as 120 points early on Monday. Broader stock-market benchmarks
rallied.
The S&P 500 gained 17.26 points, or 0.9%, to 1904.02, and
the Nasdaq Composite Index added 57.64 points, or 1.35%, to
4316.07. The Russell 2000 Index of small-company shares rose 1.2%,
with the recently hard-hit index extending last week's rebound.
Stocks swung wildly last week in heavy volume as investors grappled
with global growth worries and changing projections about when the
Federal Reserve might deem the U.S. economy strong enough to begin
raising interest rates.
The Dow ended Friday with its fourth consecutive weekly decline,
while the Nasdaq Composite briefly fell into a so-called
correction, meaning a decline of more than 10% from its Sept. 2
high. As the dust settled Monday, trading was quiet and gains were
broad. Trading volumes fell to the lowest in 2 1/2 weeks; each of
the S&P 500's 10 sectors rose.
Market watchers have been calling for stocks to halt their
nearly unhindered rise for most of this year, partly because of
higher valuations. When heavy selling materialized last week, Keith
Goddard, chief investment officer at Capital Advisors, an
independent investment manager that oversees $1.5 billion in Tulsa,
Okla., said he set up new positions in stocks including Laboratory
Corp. of America Holdings, among others.
A steadily improving U.S. economy, rising corporate profits and
thirst for dividend-paying stocks are factors likely to buoy the
market in the months ahead, he said. "The ingredients are there for
the markets to make their way higher once we get past this latest
string of concerns," Mr. Goddard said.
In other corporate news, CSX Corp. fell 1% after Canadian
Pacific Railway Ltd. said that exploratory talks about a potential
merger have been terminated. Canadian Pacific declined 1.5%.
Halliburton rose 0.6% after the company's board approved a 20%
increase to its quarterly dividend and the company reported a 16%
jump in revenue during the third quarter.
NCR Corp. fell 21% after the maker of point-of-sale devices and
automated teller machines cut its earnings guidance for the year.
Even though the recent pullback has left the Dow negative in 2014,
although the blue-chip index has gained 6.5% from a year ago.
Sam Stovall, U.S. equity strategist at S&P Capital IQ, said
the S&P is due for a pullback of 10% or more, which would mean
further declines in the index. The S&P has fallen 5.3% from its
Sept. 18 record close, through Friday. Nevertheless, he said,
investors should view additional declines as a chance to buy stocks
rather than withdraw money from the market.
"The average pullback, a decline of 5% to 10%, gets back to
break-even in only two months on average," Mr. Stovall said. "That
is very fast," he added.
European shares fell, with the Stoxx Europe 600 down 0.5%.
Business software provider SAP SE cut its earnings outlook for
2014, falling 5.8% in New York; Dutch technology company Royal
Philips NV fell 2.5% after swinging to a third-quarter loss
Japanese stocks rebounded with their biggest rally in 16 months, as
the Nikkei Stock Average rose 4%.
On Friday, the Nikkei hit correction territory from a
late-September peak. Shares were buoyed by news that a public
pension fund in Japan is working on boosting its allocation of
Japanese stocks to around 25%.
Demand for U.S. government debt drove the yield on 10-year
Treasury notes down slightly to 2.180% from 2.198% on Friday.
Yields fall as prices rise. In commodity markets, crude-oil futures
inched lower by less than 0.1% to settle at $82.71 a barrel. Gold
futures rose 0.5% to settle at 1244.00 an ounce.
Write to Chris Dieterich at chris.dieterich@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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