Investors looked at tumbling U.S. house prices, rising wholesale prices, crumbling consumer confidence and further anxiety over the U.S. Federal Reserve’s take on inflation – and they bought stocks.
By midday on Tuesday, major North American stock market indexes had erased earlier losses and posted substantial gains. The Dow Jones industrial average rose to 12,670, up 99 points or 0.8 per cent. The broader S&P 500 rose to 1378, up 6 points or 0.4 per cent.
In both cases, International Business Machines Corp. was at the heart of the U.S. rally. Soon after the company announced a $15-billion (U.S.) share buyback plan and nudged up its 2008 profit forecast, the shares bounced 3.5 per cent higher, contributing more than 30 points to the Dow’s rally. Clearly, if IBM is feeling good about its business, others should as well.
Well, not Google Inc. The Internet company, which derives most of its revenue from online advertising, was walloped after a report showed that paid ad views fell 7 per cent between January and December, suggesting that even online growth could be impaired by a slowing economy. Google’s shares fell 6.7 per cent – bringing the former superstar’s shares down 34 per cent so far this year.
In Canada, the S&P/TSX composite index rose to 13,821, up 124 points or 0.9 per cent at midday. Energy stocks were in the driver’s seat, rising 1.7 per cent. However, Cott Corp. continued to plumb new depths, falling 33.5 per cent, and Research In Motion Ltd. slid 2 per cent.
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