* Citigroup beats on earnings, lifting sector
* Apple options indicate 7.5 pct swing after results
* IBM at 52-week high ahead of earnings report
* Indexes: Dow up 0.6 pct; S&P up 0.5 pct; Nasdaq up 0.2
* For up-to-the-minute market news see []
(Updates to late afternoon)
By Edward Krudy
NEW YORK, Oct 18 (Reuters) - U.S. stocks advanced on Monday
as stronger-than-expected profit from Citigroup helped
financial shares, while investors positioned for earnings from
heavyweights Apple and IBM after the close.
Among positive surprises this earnings season, Citigroup
<C.N> reported its third consecutive quarterly profit, sending
its shares up 5.5 percent to $4.17 and boosting the S&P 500
financial index <.GSPF> 1.8 percent.
"I was doubtful going into this quarter that earnings would
be sustainable here," said Jack Ablin, chief investment officer
at Harris Private Bank in Chicago. "So far I've been proven
wrong."
Apple shares hit a year high of $319 during the day as
analysts expect fourth-quarter earnings to showcase Apple's
powerful one-two punch of the iPhone and the iPad. Apple's
shares rose 0.4 percent to $315.79. Traders in Apple Inc
<AAPL.O> options were pricing in a potential post-earnings
swing of about 7.5 percent.
The Dow Jones industrial average <> gained 69.63
points, or 0.63 percent, to 11,132.41. The Standard & Poor's
500 Index <.SPX> rose 5.56 points, or 0.47 percent, to
1,181.75. The Nasdaq Composite Index <> added 5.03 points,
or 0.20 percent, to 2,473.80.
Around 10 percent of S&P 500 companies have reported
earnings, with 84 percent of those beating expectations,
according to data compiled by Thomson Reuters. A raft of
earnings will come this week with Bank of America <BAC.N> and
Yahoo <YHOO.O>.
The potential swing in Apple shown in the options market is
based on the at-the-money straddle that expires this Friday,
said Steve Place, a founder of Investingwithoptions.com. The
strategy, which involves buying a put option and call option at
the same strike price, makes money if the stock moves a certain
amount in either direction.
There was no directional bias on the options board, but
there have been more net buyers than sellers in both Apple
calls and puts. "That indicates to us that no one wants to be
short volatility going into earnings," said Place.
Traders fear being net short Apple options because of the
way Google surged 11.2 percent after it reported earnings on
Friday.
A new mainframe computer and a recovery in global tech
spending likely buoyed International Business Machines Corp's
<IBM.N> third quarter, giving its shares room to rise. IBM
climbed 1.2 percent to $142.75 to a 52-week high prior to the
company's earnings report.
Citigroup's results, boosted by slowing credit losses and
reduced reserves for bad loans, helped to offset concern about
a forced halt to mortgage foreclosures that hit banks
recently.
The financials sector has lagged market gains in the recent
rally, with the S&P 500 up around 12.6 percent since Aug. 31
and the S&P financial index up 7.7 percent in that same
period.
(Reporting by Edward Krudy; Additional reporting by Doris
Frankel; Editing by Kenneth Barry)
