Ibm Warning Sparks Stock Sell-Off

Stocks pulled back Wednesday as a stream of healthy fourth-quarter profit reports failed to overshadow a warning from IBM about further damage from the economic crisis in Asia.

The Dow Jones industrial average fell 78.72 to 7,794.40 after a partial recovery from a 135-point slide that briefly wiped out all of Tuesday’s 119-point rally. IBM tumbled 8-1/4 - or the equivalent of nearly 33 Dow points - to 100-1/8.

Broad-market indicators also surrendered a chunk of Tuesday’s gains despite some better-than-expected fourth-quarter profit reports from Dow components Caterpillar and Exxon, as well as Compaq Computer and Delta Air Lines.

Those reports did little to distract attention from late Tuesday’s news that IBM posted a disappointing fourth-quarter profit and warned that its results are still being hurt by slack consumer demand in Asia and a strong dollar.

The significance of IBM’s report “was less so the fourth quarter, and more so the fact that they signaled that the first quarter (will be weak), with special mention of Asia and currency,” said Jeffrey Applegate, chief investment strategist at Lehman Brothers.

Declining issues outnumbered advancers by an 11-to-7 margin on the New York Stock Exchange, where volume totaled 626.22 million shares, the 11th time in 13 sessions this year that more than 600 million shares have changed hands.

Some of the stocks that moved substantially or traded heavily Wednesday:

NYSE

IBM, down 8-1/4 at 100-1/8.

The company’s fourth-quarter profits rose 3.4 percent as strength in computer services helped offset declines in personal computers and other hardware. But late Tuesday’s report was shy of forecasts, and IBM warned that this quarter’s results are being hurt by slack demand in Asia.

Compaq Computer, up 2-3/8 at 32-3/16.

The Houston-based computer maker posted a 37 percent jump in fourth-quarter profits, exceeding expectations by a small margin.

Delta Air Lines, up 2-9/16 at 118.

The Atlanta-based carrier posted an unexpectedly sharp 51 percent increase in profits for the last three months of 1997, citing strong demand from business flyers and its efforts to control costs.

NASDAQ

Qualcom, up 6-5/8 at 54-1/8.

The communications technology company reported better than expected results for its first quarter ended Dec. 28. Merrill Lynch upgraded the stock following late Tuesday’s report by San Diego-based Qualcom, Dow Jones News Service reported.