US stocks climbed on Wednesday as a strong earnings forecast from International Business Machines lifted the technology sector while companies that benefit from global growth, including DuPont and Caterpillar, rose following reports of better-than-expected economic growth in the euro zone.
The Dow Jones Industrial Average rose 148.65 points (1.38%) to 10,896.91, its highest close since May 4. IBM led the Dow's gains, up $5.79 (4.6%) to $132.68. The technology giant's Chief Executive Samuel Palmisano said the company would double its earnings to at least $20 a share by 2015 as it more aggressively pursues business in software and high-growth emerging markets. At $20 a share, IBM would have to grow its earnings around 12% a year. That compares to the company's 2007 forecast of 10% to 12% earnings growth a year.
DuPont advanced $1.57 (4.2%) to $39.26. Caterpillar climbed $2.08 (3.2%) to $68.15. The gains in the industrial giants, with their international exposure, followed data showing quarterly gross domestic product growth in the 16 countries that use the euro accelerated to 0.2% in the first three months of this year, from 0.0% in the final three months of 2009. In addition, annual GDP was 0.5% stronger from the first quarter of last year, according to a flash estimate from the European Union's Eurostat statistics agency. Both figures were marginally above economists' expectations.
Walt Disney was the Dow's worst performer with a drop of 63 cents (1.8%) to $35.13, despite the entertainment giant's fiscal second-quarter earnings and revenue topping analysts' estimates. Investors were disappointed by the company's report of a 12% drop in earnings in its parks and resorts division, its second-largest segment, which is considered an economic bellwether.
The Nasdaq Composite rose 49.71 (2.09%) to 2,425.02. The Standard & Poor's 500 index advanced 15.88 (1.37%) to 1,171.67. All of the S&P 500's sectors ended the session in the black, led by technology and industrials.