The stock market snapped out of its recent slump and staged a modest recovery in active trading Thursday, with the buying concentrated in the blue chips.
The Dow Jones average of 30 industrials rose 8.95 to close at 1,511.24. A rally in the final hour accounted for much of the gain.
By the close, advancing issues managed to take a slim lead over decliners on the New York Stock Exchange. Until the final minutes, losers outnumbered gainers. The NYSE composite index edged up 0.39 to 118.14.
Volume on the Big Board came to 130.31 million shares, compared to 131.18 million on Wednesday.
Analysts attributed the market's rebound to better performances in certain key stocks, including International Business Machines, which rose 3 3/4 to 148. IBM's declines earlier in the week had helped set a negative tone in the market.
The market's improvement also reflected diminished selling in the oil and banking groups.
Oil and banking stocks were sold heavily Tuesday and Wednesday as traders focused on the ominous implications of the recent dramatic descent in oil prices.
Traders were concerned that weak energy prices could spell trouble for the fortunes of oil companies and banks that have loans outstanding to oil exporting countries and other loans backed by energy-related assets.
But, on Thursday, the market seemed to bring into focus the benefits associated with low oil prices, such as mild inflation, analysts said.
Among other heavily traded blue chips, American Telephone & Telegraph rose 3/8 to 22 1/2, Exxon advanced 3/8 to 50 and Texaco slipped 1/2 to 27.
Airlines Stocks Active
Two airline stocks were among the most heavily traded issues. Eastern rose 7/8 to 6 1/8 and AMR jumped 1 to 44.
Phillips Petroleum was atop the list of volume leaders and closed at 11 1/8, off .
Another heavily traded stock was Merrill Lynch, which slumped 2 1/2 to 40 3/4. The company has been the subject of takeover speculation over the past few weeks.
Hewlett-Packard slid 1 to 38 3/8 in heavy trading. An analyst with Prudential-Bache Securities, Carol Muratore, said she has lowered her opinion of the stock and is now recommending that clients sell it rather than hold it. She said the promising Spectrum minicomputer line that Hewlett-Packard will unveil soon won't enhance the company's earnings until 1988, which is later than many others expect to see improvement.
Among other heavily traded issues, National Medical Enterprises fell 1/2 to 21, BankAmerica was unchanged at 12 7/8 and Federal National Mortgage Assn. fell 7/8 to 25.
Auto stocks posted mixed results. GM rose to 70, Ford fell 5/8 to 59 5/8 and Chrysler rose 5/8 to 42. Union Carbide rose 1/2 to 80, even though the company said that it had an after-tax loss in the fourth quarter and last year.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 152.90 million shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,429, compared to 2,523 on Wednesday.
Standard & Poor's index of 400 industrials rose 0.84 to 225.72, and S&P;'s 500-stock composite index rose 0.76 to 204.25.
The Wilshire index of 5,000 equities closed at 2,115.497, up 5.891.
The NASDAQ composite index for the over-the-counter market dipped 0.07 to 326.69.
At the American Stock Exchange, the market value index was off 0.24 at 241.57.
The credit markets seemed to take in stride a steep drop in the nation's basic money supply.
In the secondary market for Treasury securities, prices of short-term governments rose about 1/8 point, intermediate maturities rose from 1/16 point to 3/32 point and long-term issues rose 1/8 point, according to the investment firm of Solomon Bros.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, edged up 0.10 from late Wednesday to 110.07. The Shearson Lehman index, which makes a similar measurement, rose 0.95 to 1,154.77.
Among corporate issues, industrials held steady at levels late Wednesday in moderate dealings and utilities were unchanged in light activity.
In the tax-exempt municipal market, revenue bonds slipped 1/8 point and general obligations rose 3/8 point. Trading was light.
Yields on three-month Treasury bills fell three basis points to 6.96%. Six-month bills dipped one basis points to 7.10% and one-year bills declined three basis points to 7.18%.
Yields on 30-year Treasury bonds stood at 9.41%, unchanged from late Wednesday's level.