Blue chips surge as IBM and Cat shine Dow rises 57.45 points, Nasdaq up 8.94 while autos and retailers droop

NEW YORK — NEW YORK -- U.S. stocks climbed yesterday, boosted by better-than-expected earnings from industry leaders International Business Machines Corp. and Caterpillar Inc. The Dow Jones industrial average posted its best gain in two weeks.

As more companies reported fourth-quarter results, investors gravitated to machinery, computer and consumer goods makers that did well and are expected to keep expanding profits this year.


The Dow industrials climbed 57.45 to 5,124.35. IBM soared $8.50, to $96.25, and Caterpillar rose $5, to $59.25. IBM alone added 25.7 points to the Dow industrials and Caterpillar contributed 14.

The number of declining stocks outpaced the number of advancing issues on the New York Stock Exchange by almost 13 to 9.


The Russell 2,000 index of small-company shares rose 1.39 to 304.01 and the Wilshire 5,000 index rose 22.19 to 5,944.20. The AMEX market value index dropped 4.16 to 529.05.

In the broader market, the Standard & Poor's 500 index, representing some 70 percent of all U.S. stocks, rose 1.87 to 608.24. Computer and software stocks led the advance, which would have been larger except for sliding prices for automakers and retailers. General Motors Corp. dropped $1.25 to $47.50 and Sears, Roebuck & Co. fell 87.5 cents to $39.125.

The Nasdaq composite index advanced 8.94 to 1,007.24, led by Microsoft Corp., Intel Corp. and Oracle Corp.

Computer stock averages gained after IBM said fourth-quarter earnings rose to $3.66 a share before items from net income of $2.06 a year ago, beating analysts' forecasts of $3.47.

Other computer-related companies climbed. Tellabs Inc., a maker of data communications equipment, rose $3 to $37 after it said quarterly profits climbed to 42 cents a share from 29 cents last year.

Silicon Graphics Inc. jumped $2.50 to $26.375 even after the maker of graphics computers said fiscal second-quarter net income dipped to 30 cents a share from 34 cents in the year-earlier period.

The Morgan Stanley high technology index gained for a second day, rising 5.33 to 299.93, and the Philadelphia semiconductor index rose 1.45 to 171.75.

Caterpillar earned $1.53 in the latest quarter, up from $1.38 last -- year and ahead of expectations, suggesting to investors that slower economic growth isn't dampening profits everywhere.


Of the 122 companies that have reported earnings so far this quarter, 42.6 percent posted profits above expectations and 38.5 percent were below. At the same time in October, 56.4 percent of companies beat estimates and 32.2 percent lagged.

U.S. stocks also got a helping hand from European central banks, three of which lowered interest rates yesterday in an attempt to stimulate their flagging economies.

Rate cuts in Britain, France and the Netherlands improve the outlook there for faster economic growth and will eventually translate into increased demand for U.S. exports, analysts said. Britain and France cut benchmark lending rates a quarter-point, and Holland trimmed rates by one-tenth of a point.

British and German stock markets climbed to records.

Insurance stocks rallied after Xerox said it will sell its property and casualty unit to Kohlberg Kravis Roberts & Co. for $2.72 billion, and as Treasury bonds rallied for a third day. Most insurance companies have large holdings of bonds.

Xerox jumped $3.25 to $139.875; Cigna Corp. surged $4.375 to $199.25; Chubb Corp. climbed $1 to $103.50; and Aetna Life & Casualty Co. added 87.5 cents to reach $72.25.


Electronics maker Raychem Corp. soared $9.50 to a record $62.75. Retailers and automakers were also hurt when a Philadelphia Federal Reserve report showed a sluggish economy the mid-Atlantic region.