IBM Helps Dow Dig Out From 'Flash Crash'

By KRISTINA PETERSON And DONNA KARDOS YESALAVICH

An increased profit outlook from International Business Machines and rumors of a big software merger sparked a technology-led stock rally Wednesday, pushing the Dow Jones Industrial Average to recoup the rest of its losses from last week's plunge and then some.

The Dow ended 148.65 points higher, up 1.4%, to 10896.91, about 29 points above its close last Wednesday, the session before the market suffered a historic "flash crash." IBM jumped $5.79, or 4.56%, to $132.68 a share after its chief executive said the technology giant would double its earnings to at least $20 a share by 2015, as it more aggressively pursues business in software and high-growth emerging markets.

Because IBM is the Dow's most highly priced stock by far, its gains on Wednesday had an outsize effect on the average, accounting for more than a quarter of its point gain.

Other blue-chip technology components also posted big gains. Intel climbed 3.6%, while Cisco Systems gained 3%, Hewlett-Packard rose 2.4%, and Microsoft rose 1.9%.

Also among the big winners was Sybase, which soared 35.1% after reports that Germany's SAP AG is close to buying the software provider for $6 billion. SAP's American Depositary shares fell 1%.

Meanwhile, bank stocks fell as the Senate debated regulatory-overhaul legislation, adopting new mortgage-underwriting rules and an amendment to retain the Federal Reserve's oversight of community banks. J.P. Morgan Chase fell 0.3%, while Bank of America slipped 0.5%.

The Nasdaq Composite rose 2.1%, helped by a 2.2% gain in Apple. American depositary shares of China-based search engine Baidu rose 9.5%.

The Standard & Poor's 500-stock index rose 1.4%, with all of its sectors in the black. The technology and industrial sectors gained, boosted by data reflecting economic growth in Europe.

Gross domestic product growth in the 16 countries that use the euro accelerated to 0.2% in the first three months of this year, from 0.0% in the final three months of 2009, while annual GDP was 0.5% stronger from the first quarter of last year, according to anh estimate from the European Union's Eurostat statistics agency. Both figures were marginally above economists' expectations.

"This is a very positive sign," said Ralph Fogel, investment strategist at Fogel Neale Partners. "Once you see real growth in that area, you say OK, so they have some fiscal issues but they're growing, they're going to be able to grow their way out of their problem, they're going to be able to pay for their debt. That's what you want to see. You don't want to see an area that's contracting that has fiscal issues."

Still, lingering worries about the long-term efficacy of the nearly $1 trillion euro-zone bailout package prompted gold futures to continue their ascent into record territory as investors treat gold as a safe haven and a currency hedge. Gold futures were up $28.20, trading at $1,248.50 an ounce.

Spanish Prime Minister José Luis Rodriguez Zapatero outlined new austerity measures, including cuts to public-sector salaries.

The dollar weakened against the euro, but strengthened against the yen. The U.S. Dollar Index, reflecting the U.S. currency against a basket of six others, edged up 0.4%.

AM Report: U.S. Probes Morgan Stanley
9:30
In a step that intensifies Washington's scrutiny of Wall Street, prosecutors are investigating whether Morgan Stanley misled investors on mortgage-derivatives deals it helped design and sometimes bet against. Amir Efrati discusses the story along with Bob O'Brien. And Sudeep Reddy discusses the Senate's decision to force the Fed to disclose key details of its loans during the financial crisis.
.Among stocks in focus, Morgan Stanley dropped 2% after The Wall Street Journal reported that the bank is under investigation for collateralized debt obligations it underwrote that its trading desk bet against.

Macy's climbed 3.4% after announced that it had returned to profitability in the first quarter.

Oil futures slipped 72 cents to $75.65 a barrel after new government data showed a bigger-than-expected increase in U.S. crude-oil stocks last week.

Treasury prices slipped after an auction of 10-year notes that saw bidding below the brisk pace of Tuesday's sale of three-year debt. The 10-year note slipped 14/32 to yield 3.583%.

—Peter A. McKay contributed to this article.
Write to Donna Kardos Yesalavich at donna.yesalavich@dowjones.com

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