(Updates with U.S. market close)
By Herbert Lash
NEW YORK, Jan 14 (Reuters) - A strong earnings report from
IBM helped lift Wall Street to one of its biggest gains of a
gloomy new year on Monday, but the dollar slipped to new record
lows as recession worries lingered.
IBM surprised analysts with a preliminary statement touting
a 10 percent jump in fourth-quarter sales, although more than
half was linked to foreign operations that generate more
revenue as their currencies rise against the sagging dollar.
The U.S. currency's drop also buoyed gold and oil.
European shares rallied on IBM's results after losing
ground for six sessions in a row, led by tech giants Nokia
<NOK1V.HE> and Germany's SAP <SAPG.DE>.
The statement by IBM, ahead of its scheduled report on
Thursday, eased some investors' concerns about how much the
slowing U.S. economy will cut into corporate profits.
"It's almost inevitable a recession is going to occur,"
said Ben Halliburton, managing director at Traditional Capital
Management LLC in New Jersey.
The dollar, however, could help cushion the blow for the
blue chip and tech companies which are major exporters. The
U.S. currency slid into a record trough versus the Swiss franc
and seven-week lows against the euro and yen. Analysts said in
part this reflected concerns about weak U.S. corporate profits,
which are expected to fall 9.1 percent in the fourth quarter
from a year earlier, according to Reuters Estimates.
Still, IBM's strong showing put a more positive spin on the
impending earnings season, especially for tech companies like
Intel <INTC.O>, up 5.2 percent to $23.13 and Dell <DELL.O>, up
3.7 percent to $21.52.
The Dow Jones industrial average <> was up 160.30
points, or 1.27 percent, at 12,766.60. The Standard & Poor's
500 Index <.SPX> was up 13.76 points, or 0.98 percent, at
1,414.78. The Nasdaq Composite Index <> was up 37.86
points, or 1.55 percent, at 2,477.80.
Tech stocks have been among the market's weakest sectors
recently. The tech-heavy Nasdaq was still down about 6.6
percent since the start of the year, and the Dow down about 3.8
percent.
But many were skeptical that the day's upturn will have
much staying power, given the U.S. housing slump and its impact
on tight credit globally.
"It may not be enough to carry (the Dow) back up to 13,000.
We still have myriad problems from credit issues to inflation,"
said Warren Simpson, managing director at Stephens Capital
Management in Little Rock, Arkansas.
Markets in general have been ruled by speculation that the
Federal Reserve will need to cut rates soon, which could
undermine the dollar further.
U.S. gold futures shot to a record $917.90 on expectations
of a sharp U.S. interest rate cut and further dollar weakness.
A Citigroup metals analyst said that gold will test a
record $1,000 an ounce this year.
U.S. oil <CLc1> rose to more than $94 a barrel amid a wider
commodities rally fueled in part by the dollar drop.
Bond prices were narrowly mixed as the stock rebound failed
to convince investors the economy would skirt recession, fanned
by a report from Goldman Sachs that said a downturn was
likely.
The FTSEurofirst 300 index <> of top European shares,
buoyed by IBM and Wall Street, ended up 0.3 percent higher at
an unofficial 1,433.20 points, down from a session high at
1,437.97 points. Banks were the top performing sectors as
expectations mounted for more growth-promoting rate cuts from
the Fed and other major central banks.
MSCI's main world stock index <.MIWD00000PUS> was up 0.78
percent and its emerging market gauge <.MSCIEF> up 0.33
percent. Japan's stock market was closed for a holiday.
Gold's surge prompted buying of other precious metals, with
platinum hitting a record high before giving up some gains and
silver was quoted near a 27-year peak.
"It's human nature to buy into a market that is already
showing strength," said Robin Bhar, metals analyst at UBS
Investment Bank. "Gold could go higher still, but we don't
think this is a right time for buying."
Spot gold <XAU=> rose $9.30, or 1.04 percent, to $904.70.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand.
The euro <EUR=> was up 0.66 percent at $1.4873 and against
the yen, the dollar <JPY=> was down 0.75 percent at 108.14.
Oil halted a three-day losing streak as fear of
U.S.-Iranian tensions as well as violence in Nigeria rekindled
worries of potential oil supply disruption and boosted prices.
The oil market is caught between short-term tight supply
and downside risks to oil demand from a slowing economy, with
geopolitical events and speculators driving prices in the
near-term, analysts said.
"The market is still finding its view on what's going to
happen over the course of the year," said Simon Wardell,
analyst at Global Insight.
U.S. light sweet crude oil <CLc1> rose $1.45, or 1.56
percent, to $94.14 per barrel.
(Additional reporting by Kristina Cooke, Pedro Nicolaci da
Costa and Kevin Plumberg, Matthew Robinson in New York and Atul
Prakash in London. Editing by Richard Satran)
