Dow Rises 8.29, but Inflation Worries Hold Market Back

NEW YORK —  Wall Street blue chips, still wounded from Thursday’s 101-point rout, staged a feeble rally on Friday as bargain-hunting investors snatched up cheap shares. But the broader market, shaken by nagging inflationary fears, closed lower.

Analysts said investors’ spirits were still dampened by worries about inflation and the nation’s international trade problems.

The Dow Jones index of 30 industrials, down 101.46 on Thursday for its fifth-largest point loss ever, rose 8.29 to 2,013.93. It finished the week with a net loss of 76.26 points.

New York Stock Exchange volume swelled on Friday to 234.2 million shares from 211.8 million on Thursday as the Dow index flip-flopped from a loss of more than 20 points in mid-morning to gains of more than 25 points by the afternoon.

Declining issues outnumbered advances by about 9 to 5 in the daily tally on the NYSE.

‘Volatile’ Market

“It is a really erratic market,” said trader Bill Lord of Shearson Lehman Hutton.

Traders said that an unexpectedly sharp surge in the U.S. trade deficit and the wholesale price index have injected a new round of uncertainty about interest rates and inflation that analysts say will make investment decisions much more difficult.

“We have moved from a period when the fear was that we were headed into recession to a period where the fear is that the economy is overheated. That causes a whipsaw, volatile market,” said Prudential-Bache Securities analyst Larry Wachtel.

“After a 100-point down day, you get some people that are bottom fishing and others that are shorting, and basically, nobody knows what to do,” he said, referring to traders hunting for bargains and others selling stocks short in hopes they will continue to fall.

Traders said arbitrage-related program selling sent the market lower in the morning, and there was some concern that Thursday’s fifth-largest loss would snowball into even bigger losses on Friday.

“The lesson today is that the market is probably not going to have a repeat of the (October) crash but will remain volatile and vulnerable,” Wachtel said.

Analysts said blue chip stocks attracted some buying by traders looking for “bargains” after the big drop on Thursday.

But they also noted that stocks faced some formidable obstacles in any bid to rebound.

Bond Yields Rise

“If the market was looking for an excuse to come crashing down again, it could have certainly found it in the much higher than expected producer price number,” said Michael Metz, an analyst with Oppenheimer & Co.

The Labor Department reported Friday morning that the producer price index of finished goods rose 0.6% in March. That put added emphasis on recent worries about a possible revival of inflationary pressures.

Metz speculated, however, that investors may now be willing to tolerate slightly higher interest rates.

Interest rates rose in the credit markets, pushing yields on long-term Treasury bonds close to the 8.95% level.

Gainers among the blue chips that contributed to the Dow Jones industrials’ gain included International Business Machines, up 2 3/4 at 114 1/8, and Texaco, up 1 3/4 at 48 5/8.

Earlier this week, IBM reported a first-quarter earnings gain that drew high marks from most analysts.

Texaco, which recently emerged from bankruptcy protection, voted a 75-cents-a-share quarterly dividend and expanded the plans for its restructuring program.

Shares of Lucky Stores Inc. were heavily traded and closed down 1 3/8 at 52 1/8 amid confusion over a government filing in which potential buyer American Stores Inc. suggested limiting its purchases of Lucky stock.

Other big-name issues attracting buyers included General Motors, up 1 1/8 at 72 3/4; Procter & Gamble, up 1 at 78 7/8, and Sears, Roebuck, up 7/8 at 34 7/8.

Digital Equipment, by contrast, fell 1 5/8 to 101 1/2, hitting a new 52-week low. The company, with a very large following among investing institutions, recently reported first-quarter earnings that were essentially flat against comparable year-ago figures.

Wheeling-Pittsburgh Steel rose 4 3/8 to 15 3/8 after the company reached a settlement of its pension liabilities with the government, traders and analysts said.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 265.05 million shares.

The Wilshire index of 5,000 equities closed at 2,590.521, down 1.058 from Thursday’s close.

Standard & Poor’s industrial index rose 0.36 to 302.68, and S&P;’s 500-stock composite index was up 0.02 at 259.77.

The NASDAQ composite index for the over-the-counter market dropped 0.62 to 373.90. At the American Stock Exchange, the market value index closed at 299.24, up 0.32.

Overseas stock markets moved lower in reaction to Thursday’s Dow Jones’ plunge. In Tokyo, the Nikkei 225-share index dropped 217.78 points or 0.8% to 26,893.57. In London, the Financial Times 100-share index fell 8.6 to 1,778.6.