Stock Prices Stage Modest Rally Despite Bad News on U.S. Trade Deficit

Bargain-hunting investors rescued the stock market from another decline Tuesday, boosting prices in a moderate rally that overcame the effects of bad news about the nation’s swollen trade deficit.

The Dow Jones index of 30 industrial stocks, which fell 33.25 points Monday to its lowest close in nearly three months, recovered about half the loss by the end of trading, up 17.24 to 2,021.51. Broader market indicators also advanced.

Brokers called the rally largely a technical reaction to the market’s recent declines based on fear of rising interest rates, which erodes the relative worth of stocks. Between Aug. 3 and Monday, the Dow index had fallen 129.79 points, raising the prospects for at least a partial rebound.

Stocks, bonds and the dollar’s value initially fell when the Commerce Department reported a larger-than-expected June trade deficit of $12.5 billion, which suggested the U.S. currency would have to decline to make U.S. products more competitive and discourage America’s relentless appetite for imports.

But the impact of the trade report was reversed by investors who quickly stepped in to buy stocks when prices reached what appeared to be bargain levels, brokers said.

“I would describe this as a technical bounce-back from an oversold condition,” said William R. Rothe, managing director and head of over-the-counter trading at the Baltimore-based brokerage Alex. Brown & Sons Inc.

Hildegarde Zagorski, an analyst at Prudential-Bache Securities Inc. in New York, said the stock market followed the behavior of the dollar and bond markets, which also rallied after an initial decline on the trade news. But she remained skeptical about the immediate outlook for stocks.

“Now the question is, do we continue from here or do we come crashing back down or go down a little bit?,” she said. “I don’t know the answer to that.”

In composite trading of New York Stock Exchange-listed stocks, advancing issues outnumbered declines by about an 8-to-5 margin, with 884 up, 579 down and 509 unchanged.

Volume on the NYSE floor totaled 162.79 million shares, up from 128.56 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trading at regional exchanges and on the over-the-counter market, totaled 188.08 million shares. Large blocks of 10,000 or more shares traded on the NYSE totaled 3,223, compared to 2,470 the previous trading day.

Among prominent blue chip stocks, IBM rose 5/8 to 115 3/4, Philip Morris rose 1 3/4 to 90 1/2, Minnesota Mining rose 1 to 60 5/8 and Woolworth rose 1 3/8 to 48 3/8.

Polaroid added 7/8 to 43 3/8. An investment group seeking to acquire the company received government permission to buy more stock, although Polaroid said it planned to remain independent.

U.S. Shoe, which rose 5 7/8 Monday on news that it will consider a possible sale or restructuring, rose another 1 to 25 7/8.

The Wilshire index of 5,000 equities closed at 2,599.666, up 13.966 or 0.54% from the preceding trading day.

The NYSE composite index of all listed issues rose 0.91 to 147.49.

Standard & Poor’s index of 400 industrials rose 2.03 to 299.31, and S&P;’s 500-stock composite index rose 1.87 to 260.56.

At the American Stock Exchange, the market value index rose 0.74 to 294.57. The NASDAQ composite index for the over-the-counter market closed at 375.66, up 1.59.

In Tokyo, stock prices dipped Tuesday. The Nikkei index of 225 selected issues, the exchange’s main index, declined 4.74 points, or 0.02%, to close at 27,896.55 points.

Stock prices in London closed higher in light trading Tuesday on the London stock exchange.

The Financial Times 100-stock index, which tumbled 26.6 points Monday, closed up 8.5 points to 1825.3.