IBM Drags Dow Down as Other Indexes Gain

Broad stock measures notched new highs Wednesday, but IBM dragged the Dow Jones industrial average lower amid disappointment the company didn’t report results as robust as other technology bellwethers.

The 30-stock Dow average ended down 33.87 points at 6,850.03, and virtually all of the loss stemmed from IBM, which tumbled 10 3/8 to 157 5/8. The drop in the index snapped a four-session string of record closes.

Several broader measures overcame some morning stumbles to post new highs in the second-busiest day in Wall Street history. Records included the fifth straight high by the Standard & Poor’s 500 list of larger companies.

The technology-rich Nasdaq composite and the NYSE composite indexes also set new highs.

The day’s gains came despite a bond market that turned weak even after some new economic readings contrasted with the recent stream of surprisingly robust data that had renewed worries about inflation.

Bonds briefly moved higher after midday, sending interest rates lower, as the Federal Reserve Board reported the economy was growing moderately in December and early January with little sign of inflation except for sharply rising energy costs.

The Commerce Department also reported that housing starts plunged 12.2% in December to the lowest level in 18 months.

But Treasury prices turned lower in the afternoon, boosting lending rates, as demand was pressured by a flood of new securities from a government auction of $17.5 billion in new two-year Treasury notes. An auction of five-year notes is scheduled for today.

As bond prices fell, the yield on the 30-year Treasury rose from Tuesday’s 6.78% to 6.83%.

But the spotlight was fixed squarely on Big Blue, the computer giant whose results prompted many Wall Street analysts to trim their earnings estimates, indicating earlier expectations for the company had run ahead of reality.

“Rather than easily achieve Street estimates, IBM appeared to be huffing and puffing,” said Steve Milunovich, an analyst at Morgan Stanley.

Elsewhere, high-technology and other big-name stocks extended their rally as earnings news remained broadly positive. According to data provided by I/B/E/S Inc., 56% of companies that have reported earnings so far have beaten estimates, with 27% falling short.

But some analysts voiced concern about the IBM sell-off, not only because of what it suggested about the outlook for corporate profits but because of what it said about the current psychology of the market.

“You almost get the sense that if a company reports in line [with estimates], the stock’s going down,” said Melissa Brown, director of quantitative research at Prudential Securities.

“We’re going on three years of fairly continuous positive surprises, and companies aren’t going to be able to keep that up forever,” she said.

Another concern was that the increasingly strong dollar eroded IBM’s revenue growth in the quarter, an issue that extends well beyond the technology sphere to all multinational companies based in the United States.

In New York trading, the dollar reached a 46-month high against the Japanese yen and a 31-month peak against the German mark. It rose to 119.03 yen and 1.6420 marks.

Declining issues outnumbered advancers by a 10-to-9 margin on the NYSE, where volume was heavy. The combined volume on the NYSE, Nasdaq and American Stock Exchange totaled 1.458 billion shares, second only to the record 1.737-billion shares that changed hands July 16, 1996.

Setting records were the S&P; 500, up 3.51 points to 786.23; the NYSE composite index, up 1.23 points to 412.80; the Nasdaq composite index, up 11.09 points to 1,388.06; and the Russell 2,000 list of smaller companies, up 0.33 point to 370.65.

Among Wednesday’s highlights:

* Despite IBM’s retreat, other computer-industry shares held up. Microsoft rose 2 3/8 to 97 3/8; Intel jumped 4 1/16 to 152 1/8; and Oracle gained 5/8 to 42 3/8.

Better-than-expected profits at Compaq Computer, up 5 to 83 1/2, boosted other PC makers as well. Gateway 2000 rose 3 1/2 to 62 5/8and Dell Computer rose 2 5/8 to 66 3/4.

* Norand soared 13 5/8 to 33 after the maker of mobile data collection and processing systems agreed to be bought by Western Atlas, which lost 2 at 70 1/8.

* A positive earnings report sent Bristol-Myers Squibb up 1 1/2 to 123 1/8. Meanwhile, Johnson & Johnson jumped 3 7/8 to a record 57 3/8 after reporting a hike in quarterly earnings the day before.

* Travelers Group jumped 2 3/8 to 53 5/8, a record, after saying it would buy $1 billion in stock and boost its dividend.

* Health-care data processing company Medaphis jumped 1 11/16 to 13 1/4 amid speculation it would be bought out by HBO or National Data. HBO dropped 3/4 to 62 3/8. National Data was unchanged at 45 5/8.

Overseas, Tokyo’s Nikkei stock average rose 3.8%, Frankfurt’s DAX index rose 1.7%, and London’s FTSE-100 rose 0.6% to a new high.

Market Roundup, D7