US stocks rebounded on Monday from last week's losses after IBM reported higher-than-expected preliminary quarterly earnings, spurring a broad rally in technology shares. The surprise report ahead of International Business Machines Corp's scheduled earnings release on Thursday eased some investor concerns over how much the slowing US economy will cut into technology profits.
IBM's shares rose 5.7 percent to $103.23 and lifted other blue chip tech stocks, including microchip maker Intel Corp, up 4.1 percent at $22.88 and computer-maker Hewlett-Packard up 2.5 percent to $46.14. The encouraging earnings assessment struck a positive note in a week of crucial earnings reports that will include major banks battered by subprime losses, including Citigroup Inc and Merrill Lynch & Co Inc.
"The earnings picture provided by IBM is very positive," said Sam Rahman, portfolio manager at Baring Asset Management Inc in Boston. But while this may remove some of the concerns about the sector, "it's just one company and there are a lot more earnings to come," he said.
The Dow Jones industrial average was up 130.55 points, or 1.04 percent, at 12,736.85. The Standard & Poor's 500 Index was up 8.70 points, or 0.62 percent, at 1,409.72. The Nasdaq Composite Index was up 24.40 points, or 1.00 percent, at 2,464.34.
Adding to the market optimism on Monday, Credit Suisse raised US stocks to "overweight" for the first time this decade, saying the United States has historically outperformed when leading economic indicators fall "because the speed of macro and corporate policy response is best there."
Apple Inc's shares rose 2.4 percent to $176.77, and were the biggest boost to the Nasdaq, a day before its annual Macworld event in San Francisco. The event is the favourite venue of Apple Chief Executive Steve Jobs to roll out new products and chart the company's course for the year.
Financial stocks remained in the spotlight, with CNBC reporting Citigroup could take write-downs as high as $24 billion. Citigroup and Merrill have been mentioned in news reports as seeking more cash from sovereign funds and other wealthy investors as they face heavy losses.
Two of the largest banks in the eastern United States, M&T Bank Corp and Sovereign Bancorp Inc, said turmoil in credit, mortgage and real estate markets hurt fourth-quarter results. M&T Bank shares fell 2 percent to $72.32 and Sovereign lost 3 percent to $10.34. Also weighing on retailers were price target cuts on more than a dozen stocks by Goldman Sachs, including Coach Inc, Tiffany & Co and Costco Wholesale Corp Coach shares were down 5.8 percent at $25.29, Tiffany shares fell 4.9 percent to $34.06 and Costco dropped 3.1 percent to $64.40.
Stocks suffered a third straight weekly loss last week. The S&P 500's year-to-date drop of 4.6 percent was the fourth-worst start in the history of the Standard & Poor's benchmark.