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Dow Benefits From Big Blue’s 7-Point Surge

Associated Press

The stock market treaded water Tuesday, livened almost exclusively by a big run-up in IBM shares that sent the Dow Jones industrials higher.

The Dow average ended up 33.96 at 5,671.68, within striking distance of its closing record of 5,683.60 set March 18. Two-thirds of the Dow’s gain was from IBM’s 7-point rise to 117-3/8 on talk of strong demand for its mainframe computers.

A burst of late buying tacked more than 10 points to the Dow, but had it not been for strength all day in IBM, “it really would have been a dull, listless day,” said Ricky Harrington, a technical analyst at Interstate-Johnson Lane in Charlotte, N.C.

Advancing issues had a weak 8-to-7 lead on decliners on the New York Stock Exchange. Volume on the Big Board was moderately heavy at 406.6 million shares as of 4 p.m., up slightly from Monday’s pace.

IBM rose as high as 118-1/8, up 7-3/4, after Lehman Brothers, citing an independent research firm, said demand for IBM’s core mainframe products was very strong in March.

Lehman analyst Don Young added in a research report that the stock was “deeply undervalued.” Mainframe sales should propel IBM’s earnings higher for several quarters to come, he said.

Some of the stocks that moved substantially or traded heavily Tuesday:

NYSE

IBM rose 7 to 117-3/8.

Citing independent research, Lehman Brothers said demand for IBM’s mainframes “exploded” in March and that ongoing demand for mainframes will lead IBM to higher earnings. Lehman maintained a strong buy rating and said the stock is “deeply undervalued.”

Pacific Telesis Group rose 3/8 to 34-1/8.

SBC Communications Inc. rose 3/8 to 50-1/4.

AT&T rose 1 to 63-1/4.

SBC will acquire PacTel in a $16.7 billion pact, both companies said Monday. Under the proposal, SBC would pay PacTel shareholders a little more than seven-tenths of a share of SBC stock for each PacTel share they own. The merger of the two Baby Bells aims to build the second-largest telecommunications company in the United States.

General Motors Class E shares fell 2-3/8 to 54-3/8.

General Motors fell 1/2 to 55-5/8.

As expected, the automaker’s board approved a spinoff of its Electronic Data Systems unit. Under terms of the proposal, EDS would pay GM $500 million in exchange for a 10-year, $40 billion contract to continue providing GM with computer services.

NASDAQ

U.S. Healthcare Inc. rose 1/8 to 52.

Aetna Life & Casualty Co. agreed to acquire U.S. Healthcare for $8.9 billion in cash and stock, creating the nation’s largest managed-health-care company. Aetna’s shares were unchanged at 72 on the New York Stock Exchange.