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Stocks rise as S&P 500 up for 3rd straight day

Adam Shell
USA TODAY

Stocks closed higher Monday, adding to Friday's strong rally as investors shake off last week's volatile trading.

The Standard & Poor's 500-stock index gained 17.25 points, or 0.9% to 1904.01 and the Nasdaq composite index climbed 57.64 points, or 1.4% to 4316.07. The S&P 500 and Nasdaq were higher for a third straight day.

The Dow Jones industrial average lagged behind but turned positive in the last half hour of trading as investors shook off a big profit miss from IBM. The Dow rose 19.26 points, or 0.1%, to 16,399.67 after being down almost 120 points earlier in the session.

U.S. markets are coming off another wild week of trading, in which the Dow saw its most volatile period since 2011.

But Wall Street got some good news over the weekend when fears surrounding the Ebola virus dissipated as no new cases were reported. The Dow rallied 263 points Friday to end a roller coaster week on an up note. Still, the Dow finished the week down 1% and starts the week 5.2% below its Sept. 19 record high.

Traders work on the floor of the New York Stock Exchange.

Investor hopes for solid earnings news to power the market higher have been temporarily dashed by IBM's weak quarterly earnings report. Missing expectations by a wide margin, IBM saw its shares fall more than 7% to $168.81.

The Dow is a price-weighted index, which means high-priced stocks like IBM have a bigger impact on the index's price.

One Wall Street firm says IBM's earnings miss is not a sign the U.S. economy is losing steam, nor is it an accurate gauge of how third-quarter earnings season is going so far.

Even though IBM fell well short on earnings per share ($3.68 versus $4.32 expected) and revenues ($22.4 billion versus $23.4 billion expected), "we would caution reading too much about the broader economy on this news," Paul Hickey, co-founder of Bespoke Investment Group told clients in an early-morning research note.

Bespoke notes that IBM's revenue has declined consistently for years, adding that the company hasn't had a year-over-year revenue increase since April of 2012.

"In other words, the decline in revenue is not a new trend, and we don't feel it's representative of the trend in earnings season thus far," Hickey said.

Just this morning, he said, the market has seen solid beats from oil patch servicer Halliburton (HAL), toymaker Hasbro (HAS), and drug maker Valeant (VRX), which also raised guidance.

Heading into Monday, 64% of the 81 companies that have reported earnings have topped expectations, which is above the long-term average of 63%, according to Thomson Reuters I/B/E/S. The current earnings growth rate is 6.9%, up from 6.4% on Oct. 1.

Gannett stock climbed on news that net income rose 49% from a year ago. Acquisitions and gains in TV political ads and retransmission revenues helped GCI offset a decline in the print business.

This week, 128 S&P 500 companies and 12 Dow names report earnings.

The next big earnings report comes after the closing bell, when Apple reports. Analysts expect the iPhone 6 maker (AAPL) to post earnings per share of $1.30 versus $1.18 a year ago, according to Thomson Reuters data released after Friday's close.

The stock market has been hit by rising fears about a global growth slowdown, Ebola fears, geopolitical risks and the Federal Reserve's coming shift to a less-stimulative monetary policy.

Wall Street is also coping with a continuation of the stock market downslide in Europe. Germany's DAX tumbled 1.5% to 8717.76 and France's CAC 40 fell 1% to 3991.24. Britain's FTSE 100 dropped 0.7% to 6267.07.

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