NEW YORK -- Stocks finished mixed yesterday, as gains in health-care, oil and beverage companies offset plunges in International Business Machines and Philip Morris.
The Dow Jones industrial average fell 20.80, to 3,174.68, with IBM, Philip Morris and Westinghouse Electric accounting for virtually all of the drop.
A negative tone was set early by declines in European equities and disappointing earnings from IBM and Philip Morris. The two stocks fueled an early retreat in the Dow that accelerated as the day wore on.
Stocks gained some momentum in the final hour, as computer-guided buy orders swept prices higher. The Standard & Poor's 500 index rose 0.24, to 409.61, and the NASDAQ Composite index climbed 2.43, to 578.65. Advancers overtook decliners late in the session, to end at 745 to 702 among common stocks on the New York Stock Exchange.
"Even though the Dow 30 had a bad day, the broad market absorbed all this pretty well," said Robert Stovall, president of Stovall/Twenty-First Advisers. "That has to bode well for [today]."
Trading was active as investors adjusted portfolios before today's options expirations. About one-tenth of the 208 million shares traded on the Big Board reflected trading in IBM and Philip Morris.
IBM sank 5 1/8 , to a 10-year low of 72 7/8 , on trading of 8.2 million shares. The computer maker reported a third-quarter loss of $2.78 billion, reflecting $2.85 billion of restructuring charges that cut operating profits to $86 million. Earnings per share were 15 cents, about half of last year's 31 cents and below even the bleakest forecasts.
"People use IBM as the pulse of the economy; if their earnings are weak, how can anyone do any better?" said Richard Meyer, head of institutional trading at Ladenburg Thalmann. Still, the erosion in those two stocks, he said, masked the strength of the broader market, reflected in gainers like Quaker Oats.
Philip Morris, a perennial growth stock, shed 4 1/8 , to 79 7/8 , on 10.9 million shares traded. The company's projection of a 10 percent drop in fourth-quarter U.S. tobacco shipments because of high inventories and capacity constraints overshadowed third-quarter earnings of $1.44 a share, just shy of expectations of $1.46 a share.
Although reductions in earnings estimates for both companies were inevitable, most analysts are pessimistic about IBM's near-term prospects but bullish on Philip Morris.
Coming one day after reports of soft September retail and early-October car sales, the third-quarter results from IBM and Philip Morris, two of the largest U.S. corporations, undercut the optimism generated this week by strong results from Merrill Lynch, PaineWebber, Coca-Cola, PepsiCo, Bank of New York and Gannett, among others. That optimism had helped fuel a rally in stocks earlier this week.