Dow Gains 8.79 as Rising Dollar Boosts Stocks

A rally in the dollar helped the battered stock market snap a three-day slump Tuesday, but widespread uncertainty about the economy kept stock gains small and volume light, market analysts said. The market regained some composure after opening the week with big losses, but it lacked the strength to sustain at least two attempts to rally.

The Dow Jones index of 30 industrials, which tumbled nearly 77 points in heavy trading on Monday, ended the day up 8.79 points to 1,842.34.

Traders said bargain hunting and the dollar’s stabilization in foreign exchange trading, which eased inflationary fears, were responsible for the slight rebound. However, they cautioned it probably was not sustainable.

“There is no conviction either up or down. Today we recovered a little from yesterday’s dumping but there is no trend out there,” said analyst Hildegard Zagorski of Prudential-Bache Securities.

“If anything,” said trader Jon Groveman of Ladenburg Thalmann & Co, “the stock market is in a bear mode and this was just a bounce.”

“We still have an unsettled market and we are just going to have to see some more stability in the dollar to calm us down,” said Thomas Ryan, the head of the equity trading desk at Kidder Peabody & Co.

“We’re in the process of testing and retesting the lows” from the Oct. 19 market collapse, said Ralph J. Acampora, a technical analyst for Kidder, Peabody & Co.

Trading volume on the New York Stock Exchange slowed, with 149.87 million shares changing hands, compared to 268.91 million on Monday.

Broader market measures showed signs of stability. About 10 stocks rose in value for every 9 that fell on the NYSE, with 813 up, 748 down and 397 unchanged.

The NYSE’s composite index rose 0.81 to 130.50. At the American Stock Exchange, the market-value index was off 0.71 to 241.68.

Standard & Poor’s index of 400 industrials rose 1.81 to 265.05, and S&P;’s 500-stock composite index was up 1.70 to 232.00.

The NASDAQ composite index for the over-the-counter market closed at 305.24, up 0.08.

As measured by the Wilshire Associates 5,000 Equity Index, stocks gained $12.12 billion in value, compared to a $98-billion loss on Monday.

The market got off to a solid start on the strength of a rebound by the dollar in Europe and after foreign stocks firmed, with the Dow index rising about 30 points just minutes after the opening bell.

Although always in the positive territory, the market erased most of its gains by noon, but rallied in late afternoon. Traders said some investors saw that as an opportunity to take some profits.

Poised for a Rally

“I think . . . the market needs to mark time and establish a trading range. We haven’t got over the shock of Oct. 19,” said Edward P. Nicoski, a technical analyst for Piper Jaffray & Hopwood.

Some analysts said the market was poised for a rally by the beginning of next year.

“To me this market is in the process of getting set to complete a bottom for resumption of a rally that will retrace 50% of the total decline,” said Gene Jay Seagle, a vice president and director of technical research at Gruntal Financial.

For now, though, the market still has “a lack of confidence in Washington,” and remains concerned that Congress will reject a $76-billion deficit-reduction compromise reached last month, Acampora said.

The market also has to contend with tax-selling pressures common at this time of year, when many investors seek writeoffs to offset gains from the first half of the year.

“The first half of December is usually the culmination of the tax-selling seasons,” said Larry Wachtel, first vice president and market strategist for Prudential-Bache Securities. “You’re in a very treacherous period here.”

Among actively traded blue-chip stocks, Philip Morris rose 1 1/2 to 87 3/8, International Business Machines rose 1/2 to 111, General Electric was unchanged at 42 and Xerox fell 2 to 50 5/8.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 179.86 million shares.

In London, the Financial Times-Stock Exchange index of 100 leading shares closed down just 1.4 points at 1,578.5

Dealers said many investors remained worried about the future trend of the dollar and trading remained limited. An early gain on Wall Street failed to start a rally before the London market closed. British stocks were down sharply Monday when the Financial Times index lost 4.3% of its value.

In Tokyo, the Nikkei stock average of 225 selected issues closed the morning session today with a 160.81-point gain at 22,993.70. On Tuesday, the index rose 146.11 points after steep initial losses.