Dow jumps 172 on IBM's strong earnings

Stocks jumped today thanks to a surprise bit of good news from IBM Corp. (IBM, news, msgs), but it wasn't clear how long -- or if -- the rally will continue.

The Dow Jones industrials closed up about 172 points, or 1.4%, to 12,778. The Nasdaq Composite Index jumped 38 points, or 1.6%, to 2,478, and the Standard & Poor's 500 Index was up 15 points, or 1.1%, to 1,416.

Some traders said that stocks were boosted by the market's expectation that the Federal Reserve will push its key interest rate to 3.75% at its meeting later this month. The federal funds rate -- the rate banks charge each other for overnight loans -- is now 4.25%.

The rally was a big relief after Friday's drubbing that saw the Dow fall 247 points. It was the seventh session in nine so far in January when the blue-chip index was up or down by at least 100 points. Best of all, the indexes held their higher levels for the entire day. The market had been plagued with waves of late-day selling in recent months.

But the rally wasn't accompanied by a big jump in trading volume, which would be a signal of new bullishness.

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New York Stock Exchange volume was barely 1 billion shares; Nasdaq volume was 1.8 billion shares, or about average.

In addition, the dollar was lower today, pushing gold to its first close above $900 an ounce. Gold closed at $903.40, up 0.6% on the day. It had traded as high as $907.30 an ounce.

Crude oil, meanwhile, closed up 1.6% to $94.20 in New York today.

Tuesday's big star will be Citigroup

The market will start Tuesday with an intense focus on Dow component Citigroup's (C, news, msgs) fourth-quarter earnings report. There are suggestions that Citigroup could write down $20 billion to $24 billion in assets because of problems in the credit markets and the subprime-mortgage crisis.

The company may also cut its dividend in half, saving $5 billion a year, The Wall Street Journal said. The dividend is now 54 cents a share.

And it may cut as many as 20,000 jobs.

As dire as that sounds, the stock was up 1.8% to $29.08 today.

The New York Times noted that $24 billion is much higher than what brokerage firm analysts were expecting -- and more than twice the high end of Citigroup's previous estimate in early November, which put the losses at $8 billion to $11 billion.

But, The Times added, "In this world, bigger write-downs are better because they sweep the decks clean (and create the potential for ‘write-ups’ later if they prove too pessimistic)."

Late Friday, The Wall Street Journal reported the banking giant could receive a new capital infusion from a group of investors, including Saudi Prince Alwaleed bin Talal.

The group had been expected to include the China Development Bank, but The Journal said today the Chinese government opposes the $2 billion investment.

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IBM shares jump 5.7% on profit gain

IBM got the market off to a strong start before the open by reporting better-than-expected earnings. The stock jumped 5.7% on the day to $103.20.

Big Blue said that it had earned $2.80 a share in the fourth quarter, up 19% from a year ago and beating expectations by 20 cents a share. The company had been scheduled to report results after Thursday's close.

• Video: Inside IBM

The company said its results were due to strong business outside the United States. Revenue was $28.9 billion, up 10% from a year ago and better than the Wall Street estimate of $27.8 billion. Six percentage points of the revenue gain, however, were due to the effects of the weaker dollar.

Bulls took the news as affirmation that the global economy is much stronger than the domestic economy. That bodes well for large-capitalization stocks that get half or more of their business outside the United States.

A total of 25 of the 30 Dow stocks were higher on the day, with IBM the leader. A total of 351 S&P 500 stocks were higher, along with 76 Nasdaq-100 ($NDX.X) stocks.

Only four of 42 domestic indexes that Market Dispatches tracks were lower today.

The worst was the Amex Pharmaceutical Index ($DRG.X), which fell 0.7% to 352. The biggest contributor to the decline was a report from drug giants Schering-Plough (SGP, news, msgs) and Merck (MRK, news, msgs) that patients fared no better when taking their combination cholesterol drug Vytorin, versus a high dose of the generic form of Zocor.

Vitorin is a drug that combines Zetia with Zocor. Schering-Plough and Merck jointly market Zetia and Vitorin.

Schering-Plough was down 8% to $25.52, third-worst among S&P 500 stocks. Merck was down 1.3% to $59.78 and was the worst Dow performer.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$94.20	$92.69	$1.51	-1.85%	-1.85%
Heating oil (per gallon)	$2.5892	$2.5359	$0.0533	-2.27%	-2.27%
Natural gas (per million BTU)	$8.3530	$8.2100	$0.1430	11.63%	11.63%
Unleaded gasoline (per gallon)	$2.3728	$2.3203	$0.0525	-4.74%	-4.74%

IBM gain spreads across technology

The jump in IBM's share price today added about 45 points to the Dow -- about 28% of the total gain on the day for the index.

And it boosted tech stocks generally.

Intel (INTC, news, msgs), which reported after Tuesday's close, jumped rose 5.2% to $23.14 today; the shares had fallen 17% in the last eight trading sessions.

Cisco Systems (CSCO, news, msgs) rose 1.6% to $26.29; Hewlett-Packard (HPQ, news, msgs) rose 2.5% to $46.13; and Dell Inc. (DELL, news, msgs) jumped 3.3% to $21.45.

Apple (AAPL, news, msgs), meanwhile, climbed 3.5% to $177.78. Apple, which had fallen nearly 13% from Dec. 31 through Friday, was also helped by an upgrade from Banc of America Securities ahead of the annual Macworld trade show in San Francisco.

IBM gave no outlook beyond a quote from Chief Executive Samuel Palmisano that it was "on track to achieve our long-term earnings-per-share road map objective in 2010."

IBM had forecast earnings per share would grow to about $11 in 2010 from $6.06 in 2006 as it boosts revenue and profit margins, buys back shares, invests in its business and makes acquisitions.

Genentech shares slip on earnings

After the close, biotech bellwether Genentech (DNA, news, msgs) shares were lower after the company said it earned 59 cents a share in the fourth quarter, down 3.3% from a year ago and below the consensus Wall Street estimate of 67 cents.

Revenue was in line with Wall Street estimates at $2.97 billion, up 9.4% from a year ago.

Investors seemed concerned by slowing growth in the company's key drugs, including Avastin.

The stock was down 1.2% to $69.78. In regular trading, the stock had fallen 1.2% to $70.64.

Sears warns on weak sales

Sears Holdings (SHLD, news, msgs) offered more evidence of a slowdown in consumer spending. The company warned today that fourth-quarter profit will fall short of the consensus estimate because of weak sales at stores open at least one year. Sears expects earnings between $350 million and $470 million, or $2.59 and $3.48 per share -- well below Wall Street's estimate of $4.43 per share.

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The company, which owns Sears and Kmart chains, earned $5.33 in the same period a year ago.

Sears shares tumbled 5% to $91.38 on the day. It was the fourth-worst performer among S&P 500 stocks and the worst performer among Nasdaq-100 stocks.

Goldman Sachs downgraded Sears to "sell" from "neutral" this morning; the analysts "expect the retailer to experience accelerated share loss and profit pressures."

A nasty fall for Harman International

The day's big loser? Try consumer electronic company Harman International Industries (HAR, news, msgs), whose shares tumbled 38% today to $43 after the company cut its full-year guidance to well below analyst expectations.

It was the biggest loser among S&P 500 stocks.

Shares were hit hard a few months ago after Kohlberg Kravis Roberts & Co. and Goldman Sachs (GS, news, msgs) backed out of their planned $8 billion buyout of the company because of concerns about its business and financial condition.

Shares are down 63% from their 52-week high.

The company now expects to earn $3 to $3.10 for the year, excluding after-tax charges related to a proposed acquisition of the company that recently fell through. Previously, Harman had said 2008 earnings would meet or beat 2007 earnings, before one-time charges, of $4.14 per share.

Among its many products, Harman makes in-car devices that integrate navigation technology with CD, MP3 and radio functions.

The S&P 500 leader today was discounter Big Lots (BIG, news, msgs), up 7.6% to $13.58.

Detroit auto show kicks off

Car lovers are watching Detroit this week for the North American International Auto Show.

Ford Motor (F, news, msgs) has introduced the latest version of its F-150 pickup truck, its best-selling model, and Chrysler debuted its updated Dodge Ram pickup.

"With share losses in 2006 (and 2007), we believe Ford is critically dependent on the new F-150 for improved profit contribution," Lehman Bros. (LEH, news, msgs) analyst Brian Johnson wrote in a note to clients today. "While we expect some loyalist effect to help sales of the new F-150 in the second half of this year, we are worried that in the current environment, the market-share gain may be even more short-lived than historically, and pricing gains may disappear."

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The housing slump and slowing economy have hit Ford, Chrysler and General Motors (GM, news, msgs), and rising gas prices are the latest issue for the Big Three.

"Automakers are struggling to adjust to a new long-term reality of higher gas prices, but they have to sell today what they can make today," John Casesa, managing partner at Casesa Shapiro Group, told Bloomberg News.

Ford, which reported a whopping $12.75 billion loss in 2006, said it is on track to return to profitability in 2009. CEO Alan Mulally said the company wasn't talking to other automakers about any partnerships. Last week, Chrysler said it will team up with Nissan Motor (NSANY, news, msgs) for a car that will be sold in South America.

What's on tap this week

Investors have a lot of earnings and economic reports to digest this week, along with more news from Federal Reserve Chairman Ben Bernanke.

In addition to Citigroup's earnings Tuesday morning and Intel's after the bell, JPMorgan Chase reports before Wednesday's open, along with Northern Trust (NTRS, news, msgs) and American Airlines parent AMR Corp. (AMR, news, msgs).

Merrill Lynch (MER, news, msgs) reports on Thursday, along with Washington Mutual (WM, news, msgs) and Briggs and Stratton (BGG, news, msgs).

General Electric (GE, news, msgs) and oil services giant Schlumberger (SLB, news, msgs) report on Friday.

• Check MSN Money's earnings calendar

On Tuesday, December retail sales will be released, which will indicate whether -- and, perhaps, how badly -- consumer spending has slowed.

Consumer spending, which makes up about 70% of the U.S. economy, has been resilient amid the credit crunch, the housing downturn and the mortgage-market mess.

Forecasters wonder how long the consumer can hold up. The retail sales figure is expected to be unchanged in December, down from an increase of 1.5% in November.

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"As we begin 2008, significant headwinds are ever present for the consumer," Wachovia (WB, news, msgs) economists wrote in a weekly outlook report. "The weight of falling home prices, higher energy prices and slowing job growth will limit consumer spending growth in the months ahead."

Last week, credit card companies American Express (AXP, news, msgs) and Capital One Financial (COF, news, msgs) both warned that slowing consumer spending would hurt earnings.

Investors will get two readings on inflation this week, with the Producer Price Index released on Tuesday and the Consumer Price Index on Wednesday. Economists are expecting the PPI to have risen 0.1% in December; the CPI is expected to have increased 0.3% last month.

Later in the week, investors can hear Bernanke testify before the House Budget Committee about the economy. Last week, speaking in Washington, Bernanke said the Fed would take aggressive measures to keep the economy on track. The Fed is expected to cut interest rates by at least a quarter of a percentage point when it meets at the end of this month.

Short hits from the markets -- 4 p.m.

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	3.085%	3.010%	0.075	-1.75%	-1.75%
5-year Treasury note yield	3.064%	3.071%	-0.007	-11.32%	-11.32%
10-year Treasury note yield	3.793%	3.810%	-0.017	-6.00%	-6.00%
30-year Treasury bond yield	4.373%	4.394%	-0.021	-1.93%	-1.93%
Currencies
U.S. Dollar Index	75.61	76.04	-0.427	-1.41%	-1.41%
British pound in dollars	$1.9566	$1.9608	-0.0042	-1.64%	-1.64%
Dollar in British pounds	£0.5111	£0.5100	0.0011	1.67%	1.67%
Euro in dollars	1.4877	1.4815	0.0062	1.79%	1.79%
Dollar in euros	€ 0.6722	€ 0.6750	-0.0028	-1.75%	-1.75%
Dollar in yen	¥108.12	¥108.76	-0.64	-3.33%	-3.33%
U.S. dollar in Canadian dollars	$0.983	$1.020	$0.0027	-0.96%	-0.96%
Canadian dollar in U.S. dollars	$1.018	$0.981	-$0.0020	0.99%	0.99%
Commodities
Gold	$903.40	$897.70	$5.70	0.63%	7.80%
Copper	$3.3390	$3.3040	$0.04	1.06%	9.80%
Silver	$16.4250	$16.3700	$0.05	0.34%	10.09%
Crude oil (NYMEX) (per barrel)	$94.20	$92.69	$1.51	1.63%	-1.85%

By Charley Blaine and Elizabeth Strott

Updated Jan. 15, 2008