Stocks Rally Late in Day; Dow Gains 5

Takeover issues provided the spark for a late rally on Wall Street Thursday and blue chips closed slightly higher as investors ventured back into the market.

The Dow Jones average of 30 industrials, which showed a modest loss for most of the session, finished with a 5.53 gain at 2,289.46. The average fell 42.50 points Wednesday for its largest drop in three months.

Advancing issues slightly outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 741 up, 694 down and 507 unchanged.

Big Board volume came to 150.37 million shares, down from 163.14 million in the previous session.

Analysts said the markets were still struggling to recover from the jolt of the report Wednesday that the consumer price index jumped 0.6% in January.

The market struggled through most of the session as fears of higher inflation and interest rates continued to weigh heavily on traders’ minds.

News that Chase Manhattan Bank was raising its prime lending rate, charged to its best customers, came too late to influence the stock market. The announcement of a half-point rise to 11.5%, effective today, was made after the close of stock trading. Republic National Bank of New York also raised its rate and other major banks were expected to follow today.

Interest in takeover issues overshadowed investor concerns toward the close, as first blue chips and then the broader market turned up. “A touch of confidence has returned,” said Trude Latimer, market analyst with Josephthal & Co.

The biggest takeover news was that West Point-Pepperell Inc., the nation’s largest publicly held textile company, agreed to a $1.67-billion bid from Farley Inc., a closely held investment firm. West Point’s stock closed 1 1/4 higher at 57 1/4.

Aristech Chemical jumped 6 3/4 to 38 1/4 and led the active list on turnover of more than 2.3 million shares. The company said Wednesday that Jon Huntsman, chief executive of Huntsman Chemical, apparently wants to buy at least $15 million of Aristech stock.

Traders said investor interest in Aristech carried over to George Gulf Corp., which rose 2 7/8 to 44 3/4, and Vista Chemical Co., which added 1 3/8 to 57 5/8.

Burlington Resources Inc., the independent energy concern now 8% owned by Pennzoil Co., jumped 1 3/4 to 49 5/8. Burlington said it is suing Pennzoil, alleging that it intends to acquire Burlington but has misstated its intent in public filings. Pennzoil said the suit was frivolous.

Lin Broadcasting Co. jumped 2 5/8 to 91 1/4 in over-the-counter trading, a move that traders attributed to renewed takeover speculation. Lin declined comment on the rumors.

Chemical company Pennwalt Corp. rose 5/8 to 118 7/8. The company agreed to sell its Wallace & Tiernan unit to a management-led group for an undisclosed sum. Pennwalt has been trying to fend off a takeover attempt by New York investment group Centaur Partners.

Precious metals stocks gained ground, benefiting from the new flare-up of inflation worries. Battle Mountain Gold gained 1 to 15 5/8; ASA Ltd. 1 1/8 to 40 7/8; Homestake Mining 5/8 to 14 5/8 and Placer Dome 3/4 to 14 1/2.

Japanese issues were strong after the Tokyo market set a new high. Honda Motor rose 2 3/4 to 158 7/8.

Stock prices closed higher in bullish trading Thursday on the Tokyo Stock Exchange as the key Nikkei average climbed to another new high. The 225-share index, which vaulted 331.85 points Wednesday, climbed another 140.56 points to close at an all-time high of 32,452.49.

British stock prices closed lower Thursday as the London Stock Exchange succumbed again to fears about rising world interest rates and the recent weak trend on Wall Street. The Financial Times 100-share index closed 17.1 points lower at 2,016.6.