NEW YORK -- U.S. stocks rose yesterday to record highs as beverage and financial issues gained. The advance was tempered by a decline in International Business Machines Corp. shares, which fell on concern about third-quarter earnings.
Shares of IBM tumbled $5, to a three-month low of $92.875, after the company told analysts that problems with a line of mainframe computers would push some revenue into the fourth quarter.
The warning supported the notion that technology stocks could short-circuit if investors' high expectations aren't met.
The Dow Jones industrial average rose 18.31, to a record 4,765.52, after falling 13.74, to 4,771.16, on IBM's warning. It was the 30-stock average's eighth gain in 10 sessions and its 48th record this year.
Among the Dow industrials, shares of Eastman Kodak Co., Procter & Gamble, Coca-Cola Co. and J. P. Morgan & Co. rose, while IBM, General Motors Corp. and Aluminum Co. of America fell.
IBM closed down $2.875, at $94.625, and dragged the 30-stock average down 8 points.
Coca-Cola's stock rose $1.25, to $65.875, after PepsiCo Inc. said it still expects 15 percent growth in annual earnings per share. Pepsi's stock surged $1.25, to $48.75.
Among broader market indexes, the Standard & Poor's 500 index seesawed, closing up 2.26, at a record high of 578.77, after earlier retreating to 575.47, down 1.04. It was the index's seventh record in a row. Shares of beverage, telephone and insurance companies rallied, while auto, computer and gold issues fell.
The Nasdaq composite index rose 2.40, to 1,067.40, after sliding 2.10, to 1,062.90, earlier. Among the biggest gainers, Oracle Corp. rose $1.125, to $46; BMC Software Inc. jumped $4.25, to $48.75; and 3Com Corp. rose 87.5 cents, to $43.625.
About five stocks fell for every six that rose on the New York Stock Exchange, where about 385 million shares traded hands. It was the most active day of trading since Aug. 16, and it was helped in part by the 13.9 million shares of IBM that traded.
Tomorrow is "triple witching," when futures and options on U.S. stock indexes and options on individual stocks simultaneously expire.
Technology stocks fell no further because some investors saw IBM's warning as something specific to the company, not the industry. And the outlook for sales of computers and software remains good as businesses seek ways to become more efficient.
IBM wasn't the only technology stock to reverse course. Adaptec Inc. shed $1, to $44; Apple Computer Inc. fell 56.25 cents, to
$42.375, after being up 43.75 cents; Xilinx Inc. fell $1.375, to $50.375; Microsoft fell 12.5 cents, to $96.125; and Stratacom Inc. dropped $1.25, to $51.
Financial stocks gained after a government report of low inflation boosted hopes that interest rates will decline. When rates fall, consumers and businesses borrow more. Conversely, higher rates hurt insurers' big holdings of bonds, and inflation increases the cost of making good on claims.
Among the biggest gainers, shares of American International Group Inc. climbed 37.5 cents, to $81.375; Allstate Corp. jumped $1.75, to $35.375; Loews Corp. jumped $1.25, to $136.875; Federal Home Loan Mortgage Corp. surged 62.5 cents, to $67.875; and Dean Witter Discover & Co. rose 75 cents, to $57.75.
Stocks have risen steadily since Aug. 24 on hopes that economic growth is slowing enough to let the Federal Reserve cut interest rates while remaining strong enough for corporate profits to grow. In that time, the Dow industrials and S&P; 500 have climbed about 3.5 percent.
Earlier, the Labor Department said prices Americans paid for goods and services were little changed in August. The consumer price index rose a smaller-than-expected 0.1 percent last month, and the government said Tuesday that producer prices are under control, too.
Shares of automakers fell for the same reason IBM dropped: concern about earnings.