NEW YORK (AP) — A partial rebound in financial shares and gains by technology stocks pulled the market higher Wednesday, a day after fears about the banking system pummeled Wall Street.
Some bounce would have been expected following a sell-off but a better-than-expected 2009 forecast from IBM Corp. left technology shares looking not just oversold but as relatively safe bargains for some investors. Energy stocks also advanced as oil gained.
IBM said late Tuesday it expects its earnings for 2009 to come in well above what analysts had been expecting and that its fourth-quarter profit jumped 12 percent, easily topping analysts’ estimates. Swedish wireless equipment maker LM Ericsson also reported earnings that beat forecasts.
Not all industries shared in the advance. Airlines were weak after American Airlines and United Airlines posted lackluster results. Typical safe-havens for weak economies, like utilities and makers of consumer staples, fell as investors shifted money around.
Earnings reports commanded the market’s focus Wednesday and will do so for the next few weeks. Apple Inc. is set to report its fiscal first-quarter results after the market closes.
Beyond earnings, investors are looking for insights into what steps the new administration will take to shore up the economy. President Barack Obama’s Treasury Secretary nominee, Timothy Geithner, is on Capitol Hill for his Senate confirmation hearing. He asked Congress to act quickly and forcefully to deal with financial crisis and said Obama is working to foster economic recovery and “get credit flowing again.”
Rob Lutts, president and chief investment officer of Cabot Money Management, said investors realize earnings will be bad and are eager to hear 2009 forecasts.
“The key will be guidance. IBM was pretty confident. The more we see that, the better, but I think many will be conservative,” he said.
In midday trading, the Dow Jones industrial average rose 87.06, or 1.10 percent, to 8,036.15 after being up as much as 160 points early in the session.
Broader stock indicators also gained. The Standard & Poor’s 500 index advanced 11.37, or 1.41 percent, to 816.59, and the Nasdaq composite index rose 22.80, or 1.58 percent, to 1,463.66.
The Russell 2000 index of smaller companies rose 4.73, or 1.09 percent, to 438.38.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 601.4 million shares.
Bond prices fell as stocks rebounded. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.42 percent from 2.37 percent late Tuesday. The yield on the three-month T-bill, in demand because it is considered one of the safest investments, rose to 0.12 percent from 0.10 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 80 cents to $41.64 a barrel on the New York Mercantile Exchange.
Stocks fell sharply Tuesday on worries governments would be forced to take over wobbly banks to avoid their collapse. The Dow dropped lost 332 points, or 4 percent. It was the first time the blue chips closed below 8,000 since November.
The Royal Bank of Scotland alarmed investors around the world this week with the warning its 2008 loss might top $41 billion. That spurred the British government to announce a fresh banking bailout. In the U.S., State Street Corp. — seen as one of the safer financial firms during the current turmoil because it is a custodial bank — lost more than half its value Tuesday after reporting its profits plunged and issuing a bleak forecast for 2009.
Citigroup Inc. and Bank of America Corp., which at the end of last week reported multibillion dollar fourth-quarter losses, each plunged by more than 20 percent on Tuesday. U.S. markets were closed Monday for Dr. Martin Luther King Jr. Day.
The slide in financial stocks came as investors factored in the possibility of insolvency, Lutts said. They are also pricing in expected capital infusions that will lower the value of the common stock that shareholders own.
Lutts said even banks that had been seen as relatively stronger, such as JPMorgan Chase & Co. and Wells Fargo & Co., are facing large write-downs on investments that will require more capital.
Later Wednesday, investors will also get a reading on the beleaguered housing market. The National Association of Home Builders is scheduled to report its January housing index at noon.
Tech shares outpaced the broader market Wednesday. IBM rose $7.37, or 9 percent, to $89.35.
Among bank stocks, Citigroup rose 35 cents, or 13 percent, to $3.15, and Bank of America rose 67 cents, or 13.1 percent, to $5.77. Royal Bank of Scotland advanced 23 cents, or 6.9 percent, to $3.56, and State Street rose $1.72, or 12 percent, to $16.61.
JPMorgan rose $2.17, or 12 percent, to $20.26, and Wells Fargo advanced 80 cents, or 5.6 percent, to $15.03.
American Airlines’ parent AMR Corp. tumbled $2.46, or 24 percent, to $8, while UAL Corp.’s United Airlines fell 88 cents, or 7.6 percent, to $10.74.