IBM Lifts Blue Chip Stocks


You'd be excused for wondering how in the heck the Dow Jones Industrial Average is higher today. At roughly halfway through the trading session, more than two-thirds of its component stocks are down, with only nine out of the 30 in the black. The answer is: International Business Machines .

Technology stocks come to the rescue
After the markets closed yesterday, a slew of technology companies reported better-than-expected earnings for the final quarter of 2012.

As a headline from The Wall Street Journal put it: "IBM Shows Why Boring Is Sometimes Better." For the three months ended Dec. 31, the company's net income increased 6.3% to $5.83 billion. And more important, IBM raised its earnings outlook for 2013, saying that it now expects to deliver EPS of $15.53. If this comes to fruition, it would represent an impressive 8% increase in earnings over 2012.

Shares in IBM are trading higher today by an impressive 5%. And it's this, in turn, that's almost singlehandedly lifted the Dow. Unlike the S&P 500, the component stocks on the Dow are weighted by stock price. Given that IBM is the most expensive stock on the index by nearly a factor of two, it accordingly follows that it exerts an unusual sway on the whole. At its current price, in fact, its weight on the index is estimated to be roughly 11%.

With this in mind, it doesn't hurt that shares of McDonald's(NYSE: MCD) are higher as well, given that it's the fifth most heavily weighted component of the Dow, accounting for more than 5%. This morning the popular fast-food chain said that it earned $1.38 per share in the fourth quarter of 2012 compared to $1.33 a year earlier and an average analyst estimate of $1.33 per share as well.

Outside the Dow, another tech heavy released earnings. Shares of search giant Google are up sharply thanks to much-better-than-expected results. Excluding one-time charges, the company earned $10.65 per share in the fourth quarter, up from $9.50 a share in the same three-month period in 2011. Analysts had forecast EPS of $10.42. According to Google CEO Larry Page:

We ended 2012 with a strong quarter. Revenues were up 36% year-on-year, and 8% quarter-on-quarter. And we hit $50 billion in revenues for the first time last year -- not a bad achievement in just a decade and a half. In today's multi-screen world we face tremendous opportunities as a technology company focused on user benefit. It's an incredibly exciting time to be at Google.

Want to learn more about Google?
As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other Web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource, and you'll receive a bonus year's worth of key updates and expert guidance as news continues to develop.

The article IBM Lifts Blue Chip Stocks originally appeared on

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Google and McDonald's. The Motley Fool owns shares of Google, International Business Machines., and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.