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IBM's surge helps fuel rally

Most people figured this was going to be a week IBM wanted to forget.

Some of its vaunted computer systems at the Olympics have very publicly malfunctioned, and on Wall Street, analysts were expecting its second-quarter profit to be sharply lower than a year ago.

But Thursday, the company delivered _ and, in turn, received _ some unexpected good news.

A better-than-expected earnings report from Big Blue and a series of reports on the economy that hinted at an economic slowdown ignited a powerful market rally, sending the Dow Jones Industrial Average up more than 67 points to 5,422.01. The Nasdaq composite index, laden with high-tech issues, jumped 20.02 points to 1,062.39, posting a bigger percentage gain than the Dow industrials.

IBM said its second-quarter earnings were down only 22 percent, less than many analysts and even the company had expected. The news sent its stock surging by almost 13 percent. IBM's shares gained $11.87{ to close at $103.62{ on the New York Stock Exchange.

"There was a fear that there was going to be a disaster," said David Wu, an analyst with Chicago Corp. in New York. "It didn't happen, and instead we got some pretty good news."

Meanwhile, reports showed that orders for big-ticket durable goods and sales of existing homes both fell in June. Analysts said Thursday that it's too early to tell whether the anticipated economic slowdown has started.

"The numbers show some signs of a slowing in the economy, but it still seems to be doing well," said economist Lynn Reaser of Barnett Banks Inc. in Jacksonville.

The declines were from record highs, she explained, and a big drop in initial claims for jobless benefits, also reported Thursday, suggest "an economy that still may be growing above the speed limit."

Federal Reserve chairman Alan Greenspan and other analysts are predicting the economy will slow during the second half of the year. But Greenspan told Congress this week that while he expects moderation, it is uncertain when the change will happen.

Although he agreed it's too early to say the slowdown has begun, Richard Berner of Mellon Bank in Pittsburgh noted Thursday that "the data certainly brought a smile to the financial markets this morning."

The Commerce Department reported that factory orders for durable goods slipped 0.8 percent to a seasonally adjusted $169.1-billion in June, from $170.4-billion a month earlier.

In a separate report, the National Association of Realtors said sales of previously owned homes fell 2.3 percent in June, to 4.18-million at a seasonally adjusted annual rate.

The decline, the first since January, came as mortgage rates reached the highest level in more than a year. Sales in May had shot up to a record 4.28-million rate.

Similarly, Florida's existing home market suffered its first decline in more than a year. Resales slipped 3 percent in June from a year ago, according to the Florida Association of Realtors. In the Tampa Bay area, resales fell about 7 percent in June from a year ago.

Home prices, however, creeped up slightly. Statewide, the median home price rose 7 percent, to $94,700. In Tampa Bay, home prices rose 1 percent to $82,300.

The Labor Department reported Thursday that first-time claims for jobless benefits fell by 45,000 last week to 322,000, lowest in six months. But it attributed much of the drop to the return of workers temporarily laid off while the automobile industry retooled production lines for 1997 models.

The favorable response to IBM's results came as welcome relief following a string of negative market reactions to seemingly strong reports from other computer industry bellwethers.

International Business Machines Corp. earned $1.35-billion, or $2.51 per share, in the three months ended June 30. That's down from $1.72-billion, or $2.97 per share, in the 1995 quarter.