Dow Jumps 26.28; Market Reverses Sharp 2-Day Skid

Wall Street recovered Tuesday from the drubbing it received in the two previous sessions, but analysts differed on the significance of the rally.

The Dow Jones index of 30 industrials rose 26.28 to 2,304.69.

Volume on the New York Stock Exchange totaled 171.76 million shares, against 208.44 million the previous session.

Advancers outpaced decliners, with 990 issues up, 563 down and 397 unchanged.

“The bull market is alive and well,” said Robert Colby, an analyst with Smith Barney, Harris Upham & Co., calling the 94-point drop in the Dow industrials Friday and Monday “a flash in the pan.”

But some analysts were not impressed by the gain.

“The market is not as strong as it looks,” said Michael Metz, an analyst with Oppenheimer & Co. “It’s a rather selective rally, with window dressing for the end of the quarter,” when institutions buy stocks to close out their portfolios.

On Monday, the Dow Jones industrial average fell 57.39 to 2,278.41, its third-largest one-day drop ever. The closely watched index was down 36.79 points on Friday.

Market watchers called the steep drop a correction necessitated by the big gains amassed by stocks since Jan. 2.

Analysts said traders were troubled Monday by the dollar’s decline and the possibility of rising interest rates, as well as the confrontation between the United States and Japan over computer chip trade.

Borg-Warner led the NYSE most active list, rising 2 to 49 1/8. GAF Corp., which last week increased its stake in Borg-Warner to 20%, offered Tuesday to buy the firm for $46 a share. GAF, meanwhile, rose 1 1/2 to 48 1/2.

Digital Equipment, hit hard in Monday’s drop, rose 4 5/8 to 161 5/8. Among the other big gainers were Ford Motor, which rose 2 3/8 to 84 3/8, and Honda, which jumped 3 5/8 to 88 3/4.

IBM, which is expected to unveil a new line of personal computers on Thursday, fell 2 to 150 1/8.

Large blocks of 10,000 or more shares traded on the New York Stock Exchange totaled 3,322, compared to 3,809 on Monday.

Government bond prices moved sharply lower, retreating from early gains after two major banks announced that they were raising their base lending rates by a quarter of a point.

Citibank and Chase Manhattan, the nation’s largest and third-largest banks, respectively, said late Tuesday that they were raising their prime lending rates to 7.75% from 7.5%.

The bellwether 30-year Treasury bond, down about 7/32 point before the announcement, was off about a full point, or about $10 per $1,000 in face value.

The yield rose to 7.92% from 7.83% late Monday.

In the secondary market for Treasury bonds, prices of short-term government securities fell in the range of 1/8 point to 7/32 point, intermediate government securities fell nearly 1/2 point and 20-year issues were off 1/32.