Market rallies sharply

Stock prices rebounded sharply Monday after last week’s market rout, boosted by better-than-expected profit at IBM.

In a preliminary report, IBM said its fourth-quarter earnings rose 24% from a year earlier, exceeding the estimates of Wall Street analysts.

The Dow Jones industrial average, whose 30 components include IBM, rose more than 170 points Monday. The index fell nearly 250 points Friday.

“The market was pretty oversold,” said Richard E. Cripps, chief market strategist for Stifel Nicolaus. “We were due to bounce back, and the IBM news didn’t hurt.”

IBM’s news, with earnings season about to get underway in earnest, raised some hopes that fourth-quarter earnings in general might not be as bad as feared.

Tech shares in particular rallied. An index of information technology stocks in the Standard & Poor’s 500 index climbed 2.6%, paring its 2008 decline to 7.2% -- the worst performance among 10 industry groups in the equity benchmark this year.

The Dow gained 171.85 points, or 1.4%, to 12,778.15. IBM was the biggest gainer in the Dow, rising $5.26, or 5.4%, to $102.93.

Broader stock indicators also advanced. The Standard & Poor’s 500 index climbed 15.23 points, or 1.1%, to 1,416.25 and the Nasdaq composite index shot up 38.36 points, or 1.6%, to 2,478.30.

The Russell 2,000 index of smaller-company stocks rose 7.83 points, or 1.1%, to 712.48.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange.

Yields on government securities edged lower. The benchmark 10-year Treasury note fell to 3.77% from 3.79%.

Gold futures ventured further into record territory, rising $5.50 to $901.60 an ounce, as the dollar fell against other major currencies. The euro reached a new high, nearing $1.49.

Other commodities also were higher. Crude oil rose $1.51 to settle at $94.20 a barrel on the New York Mercantile Exchange.

For the first time this decade, Credit Suisse Group issued a bullish recommendation on the U.S. stock market, raising its rating on American equities to “overweight” from “benchmark.” The securities firm said the Federal Reserve was showing a commitment to maintain economic growth.

In other market highlights:

* Newmont Mining climbed $1.50, or 2.7%, to $56.22 as gold and platinum advanced to records. Oil’s rebound, meanwhile, lifted oil service stocks. Halliburton rose 57 cents, or 1.6%, to $36.49. Schlumberger gained $1.52, or 1.6%, to $95.53.

* Citigroup climbed 50 cents, or 1.8%, to $29.06. The giant bank is expected to report a fourth-quarter loss today of as much as $4 billion, its first deficit since the early 1990s, according to a survey of analysts by Bloomberg. Citigroup also could disclose a cash infusion from foreign investors.

* Schering-Plough tumbled $2.21, or 8%, to $25.52. The company and Merck said their best-selling cholesterol pill Vytorin worked no better than an older, cheaper drug. Merck fell 77 cents, or 1.3%, to $59.78.

* Harman International Industries plunged $25.97, or 38%, to $43, marking the steepest drop in the S&P; 500. The maker of audio and video equipment cut its earnings forecast because of falling prices for its navigation devices. In September, private equity investors canceled an agreement to buy Harman for $120 a share, or $8 billion, citing a decline in the company’s performance.

* Sears Holdings slumped $4.79, or 5%, to $91.38 after the retailer warned that its fourth-quarter earnings would come in as much as 51% below year-earlier levels. U.S. same-store sales at the Kmart and Sears chains fell an estimated 3.5% in the nine-week holiday shopping season ended Jan. 5, the company said, citing increased competition and economic weakness.

* Home Depot, Bed Bath & Beyond and Lowe’s gained after a Credit Suisse analyst said the home-improvement stocks were undervalued relative to other retail stocks. Home Depot added 68 cents, or 2.8%, to $25.39. Bed Bath & Beyond climbed 52 cents, or 2%, to $26.66. Lowe’s gained 53 cents, or 2.6%, to $20.84.

* Construction-crane maker Terex surged $3.81, or 7.2%, to $56.74 after agreeing to buy ASV for about $488 million in cash to add compact rubber-track loaders to its line of building machines. ASV jumped $5.50, to $17.79. Separately, Barron’s magazine reported that Terex might draw a takeover bid of as much as $100 a share.

* Overseas, key stock indexes rose 0.2% in Britain, 0.2% in Germany and 0.6% in France. Tokyo’s stock market was closed Monday for a holiday.