NEW YORK — NEW YORK -- U.S. stocks rallied for a second day yesterday as International Business Machines Corp. climbed on expectations that it will meet or exceed first-quarter earnings forecasts.
The Dow Jones industrial average climbed 33.96 to 5,671.68, adding to Monday's 50.58-point advance and coming within about 12 of its March 18 record. The broader Standard & Poor's 500 index rose 1.54 to 655.27, about 6 points shy of a record.
IBM soared $7.25, or 6.6 percent, to $117.625, adding 21 points to the Dow industrials. It was the biggest one-day rise for the world's largest computer maker since it announced fourth-quarter earnings Jan. 18.
The market's advance would have been greater had it not been for a slump in more than a dozen housing and building material companies, together with announcements of weaker-than-expected earnings from a string of smaller software and computer companies.
About 12 stocks rose for every 11 that fell on the New York Stock Exchange, where volume totaled 406.6 million shares.
The Nasdaq composite index rose 4.72 to 1,111.29, lifted by higher prices for biotechnology stocks such as Chiron Corp., up $2.75 to $102.75, and Amgen Inc., ahead $1.25 to $58.875. The Russell 2,000 index of small-company shares added 0.79 to 333.23, its third straight record, and the American Stock Exchange market value index rose .21 to 572.65.
IBM paced the day's advance. Chairman and Chief Executive Officer Louis Gerstner "has done a great job," said Robert Torray, who manages $2 billion in assets at his Bethesda (Md.) firm and keeps 6 percent of his portfolio in IBM stock.
Torray started loading up on IBM shares in 1993 at an average cost per share between $45 and $50. "I wasn't paying much to find out" if Gerstner could engineer a turnaround, Torray said. "The prevailing view is they're going to make $12 a share this year. It's a solid value."
Lehman Brothers helped trigger IBM's advance, telling clients that IBM shipped 80 percent more computing power in its mainframe business in the first quarter from a year earlier, significantly above an earlier estimate of 45 percent.
Growth of that magnitude is expected to lift IBM's profits to $2.39 a share in the first quarter, up from $2.12 a year ago, leaving plenty of room for the company's shares to rise, Lehman said.
Oil shares rallied as crude oil prices jumped 44 cents to $22.70 a barrel and gasoline futures surged to a 4 1/2 -year high.
Chevron Corp. gained 87.5 cents to $57.125; Mobil Corp. advanced 87.5 cents to $116.875; and Amoco Corp. climbed 87.5 cents to $37.375.
Drug manufacturers rose on expectations that companies such as Pfizer Inc. and Johnson & Johnson will satisfy earnings forecasts regardless of the economy. Pfizer rose $1.875 to $71.875; J&J; gained $1.875 to $95.125; and Warner-Lambert Co. climbed $2.50 to $108.25.
Lycos Inc., a maker of software that lets computer users easily find information on the Internet, surged $5.9375 to $21.9375 after selling 3 million shares at $16 each. York Group Inc., the country's second-largest casket maker, climbed $3.75 to $16.75 after selling 2.3 million shares at $13.
Teledyne Inc. jumped $1.625 to $33.50. Allegheny Ludlum Corp., the largest U.S. maker of stainless steel, offered Monday to buy the defense conglomerate for $2.04 billion in stock.
Household International Inc. climbed $2.75 to $73. The finance company is expected to introduce a corporate travel charge card with Carlson Wagonlit Travel, USA Today said.
Bally Entertainment Corp. leaped $3.625 to $21.625. ITT Corp. is in "high-level" talks to buy Bally, CNBC correspondent Dan Dorfman reported. ITT vaulted $1.50 to $62.625.
Homebuilding, furniture, hardware and building-materials stocks tumbled after Goldman, Sachs & Co. lowered its investment opinion on a dozen companies, saying demand for their products will suffer from rising interest rates and increased competition and that their earnings momentum will keep deteriorating.
Centex Corp. dropped $1.25 to $29.50; Kaufman & Broad Home Corp. fell 37.5 cents to $15.50; Armstrong World Industries Inc. declined $1.125 to $60; Ethan Allen Interiors Inc. skidded $1.25 to $24.625; and Black & Decker Corp. retreated $1 to $38.
Retail stocks, among the market's biggest gainers since early February, slid in response to a weekly Mitsubishi Bank/Schroder Wertheim survey that showed sales in the last week of March were little changed.
Wal-Mart Stores Inc. fell 75 cents to $22.75; Federated Department Stores Inc. slumped $1.375 to $31.625; J. C. Penney Co. skidded $1 to $49.50; Nordstrom Inc. dropped $1.75 to $46.25; Dillard Department Stores Inc. fell 75 cents to $33.875; and Mercantile Stores Co. lost $1.50 to $60.
Pub Date: 4/03/96