Big Blue Gives Stocks a Bounce

IBM surprised investors Monday by releasing preliminary financial results that were much higher than Wall Street analysts anticipated.

Big Blue said its fourth-quarter sales rose 10% to $28.9 billion, beating $27.8 billion forecasts, and earnings of $2.60 a share were 20 cents ahead of estimates.

IBM attributed the better than expected results to currency benefits and strength in Asia, Europe and emerging countries, benefiting from a falling U.S. dollar and global diversification even as the U.S. economy teeters on the edge of recession.

“The broad scope of IBM’s global business — led by strong operational performance in Asia, Europe and emerging countries — drove these outstanding results,” IBM CEO Samuel J. Palmisano said in a statement.

Six points of IBM’s fourth-quarter sales gain came from currency benefits, and four points of its full-year 8% sales gain. IBM ended the year with $16 billion in cash on $98.8 billion sales.

IBM will report full results late Thursday.

The results were good news for an economy reeling from the subprime mortgage market meltdown, boosting IBM shares by 5% and sending the major stock indexes more than 1% higher.

Intel, which reports its quarterly results tomorrow night, was a big beneficiary of IBM’s announcement, gaining 5% ahead of its results. Analysts expect Intel to report a 12% sales gain to $10.84 billion, and earnings of 40 cents a share, according to Thomson Financial. AMD, which reports Thursday, was up 2.5%.

Also tomorrow, investors will have to contend with wholesale inflation data, an important report two weeks ahead of the next Federal Reserve meeting, and Citigroup will report its closely watched results. Consumer inflation data will follow on Wednesday.

Apple rose 3.5% ahead of the start of the Macworld conference.

SAP, up 4%, also raised guidance, boosting Oracle shares too.

NetSuite lost 5% on a Citigroup sell rating, and Harman International and Compuware fell on warnings.

The Nasdaq rose 38 to 2478, the S&P gained 15 to 1416, and the Dow surged 171 to 12,778. Volume declined to 3.63 billion shares on the NYSE, and 2.19 billion on the Nasdaq. Advancers led by a 23-10 margin on the NYSE, and 18-12 on the Nasdaq. Upside volume was 71% on the NYSE, and 74% on the Nasdaq. New highs-new lows were 67-187 on the NYSE, and 56-224 on the Nasdaq.