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Why Big Blue Is Moving the Dow Today -- and Every Other Day

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A bundle of important tech stocks are riding high today, all thanks to positive Tuesday-night earnings reports.

IBM  (NYSE: IBM  ) jumped as much as 6.3% overnight thanks to the margin-boosting effects of strong software sales. Big Blue beat analyst targets on both the top and bottom lines.

Google  (NASDAQ: GOOGL  ) has soared 6.5% in another case where rising margins overpowered somewhat slow top-line growth. Investors loved the strong earnings more than they disliked the top-line disappointment.

Even chronically troubled chip designer Advanced Micro Devices  (NASDAQ: AMD  ) rose to the challenge with a massive 10% gain, based on strong sales of high-margin server-class products. Revenue was in line with Wall Street estimates, but the non-GAAP losses turned out somewhat slimmer than expected.

All of this high-margin tech love boosted the Silicon Valley-friendly Nasdaq index by 0.3%, even as the broader S&P 500 benchmark traded down. This makes sense: Actual results in the Nasdaq's core sector should count for more than the worries over debt ceiling reform and soft European growth predictions that slowed down the wider market today.

But why, then, is the Dow Jones Industrial Average  (DJINDICES: ^DJI  ) gaining 68 points, or 0.5%, as of 1:45 p.m. EST? More than two-thirds of the 30 blue-chip stocks are trading in the red, after all. That includes three of the five tech-based components.

However, IBM is not only the Dow's biggest mover today -- it's also the most influential stock on the index to begin with, courtesy of a share price in the $200 range.

For every 1% Big Blue's shares move, the Dow gains or loses 16 points. IBM added 80 points to the Dow today, single-handedly overcoming a storm of small drops.

So there you have it, for better or for worse. When IBM jumps or falls by some outlandish amount like the 5% it has gained as of 1:45 p.m. EST, it's almost impossible for the Dow not to follow suit.

If you're looking for some long-term investing ideas, let me invite you to read the Fool's brand-new special report: "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so just click here and get your copy today.

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9/28/2016 4:02 PM
IBM $158.29 Up +1.52 +0.97%
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Alphabet (A shares… CAPS Rating: *****