Squawk Morning Briefing: Big Blue

So far, U. S. equities have done what they need to in order to keep downside expectations alive but insist that bounces remain corrective and result in continued selling to maintain that view. We have said many times that the DJIA cannot go very far in either direction if IBM isn’t along for the ride. IBM reports after the close today and any significant move in IBM can’t help but impact the indices.

Let’s put this in perspective. There are three other DJIA component stocks reporting earnings today. UNH and VZ reported this morning and MSFT reports after the bell. If one adds together the share price of those three stocks and then adds on another 50% you get to the approximate share price of IBM. In a price weighted index like the DJIA that means that a 1% move in IBM trumps a 1% move in the three other stocks reporting earnings combined. Put simply, where IBM goes, the index is likely to follow. Since earnings have the potential to create large moves, a surprise move in IBM could result in a significant move in DJIA and could impact whether or not a significant sell-off in the index is underway.

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