IBM managed to beat expectations on the earnings front, but disappointed with a 4% decline in third-quarter revenue, leading to downgrades from a rash of brokers. The subsequent 6.5% fall in its share price has been weighing the Dow Jones down all day.
IBM has a percentage weight of 7.8% in the Dow, and its fall today accounts for a drag of over 70 points on the Dow. The S&P 500 is a much broader index, and is capitalisation weighted, meaning IBM's drop has had a much less pronounced effect on it.
Although there have been concerns that the resolution to the fiscal wrangles in Washington was merely a temporary one, the performance of the stock market shows that investors feel there are reasons to be optimistic. By late in today’s trading session, the S&P 500 was up 0.5% at 1730.0, which is a new all-time high and, barring a late sell-off, looks on track to set a new closing high.
The earnings season continues tomorrow with Dow component General Electric, while Morgan Stanley rounds out the reporting from the big guns in the financial sector.