Stock Prices Advance Despite Drop by IBM
By Robert O'BrienDow Jones Newswires
NEW YORK -- A rally in blue-chip stocks was cut short by rumors that International Business Machines ' third-quarter earnings will fall short of analysts' projections.
These rumors swirled in the final hours of the trading session, traders say, hurting IBM's shares, which fell 2 7/8, or 2.8%, to 100.
The Dow Jones Industrial Average gave up most of its intraday gains of 64 points, but did manage to finish in positive territory for the second straight session, rising 16.73, or 0.21%, to 7851.91.
Once again the outlook for third-quarter earnings played a key role in the market's performance. Investors have been worried about some weaknesses in global currency markets, and the recent performance of the U.S. dollar in those markets will affect the profits of some big U.S. multinationals.
"Valuations in the [blue-chip] group have gotten stretched," said Thomas Galvin, chief equity strategist at Deutsche Morgan Grenfell, who added that many investors were moving away from blue chips into small-cap issues. What's got investors most spooked, Mr. Galvin said, is that blue-chip profit growth seems more uncertain than in some time. Ever since companies like Gillette , McDonald's and Coca-Cola issued disappointing forecasts about their earnings outlooks last month, investors have been reluctant to bid up share prices of blue chips.