Wall Street reversed earlier losses and rallied Tuesday after IBM approved a $15 billion stock buyback, suggesting to investors that there...

Share story

NEW YORK — Wall Street reversed earlier losses and rallied Tuesday after IBM approved a $15 billion stock buyback, suggesting to investors that there are still some companies out there with financial muscle.

The Dow Jones industrial average rose 114.70 to 12,684.92, after declining in earlier trading.

Microsoft, one of the 30 Dow stocks, gained 54 cents to close at $28.38 a share. Boeing, also a Dow stock, fell 9 cents to $84.57.

Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 9.49 to 1,381.29, and the Nasdaq composite index rose 17.51 to 2,344.99.

IBM said the buyback will boost its earnings for 2008 past Wall Street’s forecasts. Shares of Big Blue vaulted $4.30, or 3.9 percent, to $114.38.

The buyback news followed two dismal economic reports showing core wholesale prices shot up more than expected last month and that consumer confidence is waning. The data reinforced worries that the United States is suffering from stagflation, a state when the economy weakens amid rising costs.

“The market is kind of overcoming negative news, which is potentially a next step toward higher prices,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “At least in the short-term, it’s a nice change here.”

Earlier, traders considered Tuesday’s two economic reports decidedly downbeat.

The Conference Board’s index of consumer confidence plunged in February to 75.0 from a revised 87.3 in January. The reading was the lowest since the index registered 64.8 in February 2003 and was far below analysts’ average estimate. Though the report is not a perfect predictor of consumer spending, it suggests Americans are watching their budgets.

Meanwhile, the latest wholesale-inflation report showed the producer-price index (PPI) rising by a full 1 percent in January, driven by higher energy prices and soaring food costs.

“The market is holding up extraordinarily well given all this negative stuff,” said Scott Fullman, director of investment strategy for I. A. Englander & Co. He said the prospect of more corporate buybacks was a “positive for the market.”

“The market is tired of going down,” he said.