Dow Rebounds on Program Buying Surge : Index Climbs 15.62 to Close at 2,496.32

A late burst of program buying pulled blue chip stocks higher Tuesday as investors took refuge in the U.S. financial markets following Monday’s broad selloff on world stock markets.

The Dow Jones industrial average closed 15.62 points higher at 2,496.32 after falling 37.13 points Monday.

Advancing issues outnumbered declining ones by a margin of about 3 to 2 in nationwide trading of New York Stock Exchange-listed stocks.

Volume on the floor of the Big Board came to 187.57 million shares, up from 163.42 million in the previous session.

Traders said firmness in the dollar and the better bond market Tuesday partly reflected a flight to safety by investors.

“The market is healthier than people give it credit for,” said Jack Solomon, technical analyst at Bear, Stearns & Co., adding that he saw an influx of money into the dollar, Treasury bonds and gold.

Jack Barbanel, a vice president with Gruntal & Co., attributed Tuesday’s volatility to uncertainty about the political upheaval in China and concern about Iran following the death of Ayatollah Ruhollah Khomeini over the weekend.

Uneasiness over the violence in China, where hundreds have died since troops began firing on pro-democracy demonstrators Sunday, depressed world stock markets Monday, sending the Hong Kong Stock market down 22%.

But traders said a slight rebound in Hong Kong stocks helped U.S. stocks Tuesday. Hong Kong’s main stock indicator, the Hang Seng index, which plunged 581.77 points Monday, advanced 56.1 points Tuesday to 2,149.71.

Traders said Wall Street stocks followed the Treasury bond market for much of the day, rising in the morning, erasing their gains in the afternoon and then rebounding in the last hour of trading. A late spurt of computer-driven program buying aided the final advance.

Traders said the growing perception that the Federal Reserve is taking a looser stance on credit also underpinned stocks.

“It’s not a question whether the Fed will ease, but when,” said Leo Grohowski, a portfolio manager with Marinvest.

Barbanel predicted that trading would remain choppy until Friday, when the Labor Department issues its producer price report for May. The markets believe the report, a key inflation indicator, may provide some clue as to the Fed’s next move.

Despite Tuesday’s uneven session, Alfred E. Goldman, a vice president with A. G. Edwards & Sons in St. Louis, said the market still appeared strong.

“Stocks had plenty of opportunity to head south, but they didn’t--and this tells me that momentum was up,” he said.

But he also advised caution: “The music is still being played--I would just be dancing a little bit closer to the exits.”

Leading the NYSE’s most active list was RJR Holdings, which rose 1/2 to 23 after RJR Nabisco said it was selling five food businesses for $2.5 billion. The sales were expected as part of the company’s plan to reduce debt following its acquisition by Kohlberg Kravis Roberts & Co.

American Cynamid, which announced Monday that it would acquire Praxis Biologics Inc. for about $237 million in securities, was down 2 1/4 to 53 1/4

CNW, which said it was being bought out for $1.6 billion by a management-led investor group, was up 3/4 to 47 1/2.

Boeing rose 1 1/8 to 76 3/4, rebounding from sharp declines in previous sessions.

The Wilshire index of 5,000 equities closed up 16.662 at 3,197.946.

The NYSE’s composite index of all its listed common stocks rose 1.04 to 180.93.

Standard & Poor’s industrial index moved up 2.58 to 371.10, and S&P;’s 500-stock composite index advanced 2.21 to 324.24.

The NASDAQ composite index for the over-the-counter market picked up 0.12 to 447.96. At the American Stock Exchange, the market-value index closed at 360.84, up 1.26.

In Tokyo, stock prices eased slightly Tuesday for the fourth straight trading session as large investors kept clear of the market. Trading was light and trendless as investor uncertainty over the situation in China continued. The key Nikkei 225-share average, which fell 210.34 points Monday, eased 5.07 points to 33,452.01.

Share prices rallied to close significantly higher on the London Stock Exchange, breaking a five-day string of losses. The Financial Times 100-share index rose 18.9 points to finish at 2,107.4, its best level of the day.

Commodities

Cotton prices continued their slide Tuesday, while grain and soybean futures fell, livestock and pork prices declined and energy futures were lower.

Cotton prices continued the downward spiral that began Monday on New York’s Cotton Exchange.

Ed Whitten, an analyst with Balfour Maclaine Corp. in New York, said there is concern that the Chinese may cancel orders already made for cotton.

China is a major buyer of cotton, despite being one of the world’s major producers.

Cotton was 1.45 cents to 2 cents lower, with July at 63.83 cents a pound.

Grain and soybean futures prices were lower on the Chicago Board of Trade, with wheat prices falling despite announcement of a major sale to China. Monday’s announcement of the sale of 1.85 million metric tons of wheat was expected to be a boost to wheat prices, but that did not occur.

Corn prices were mostly lower on news that Egypt and Turkey bought French maize rather than U.S. corn and on the lack of confirmation of sales of U.S. corn to the Soviet Union.

However, after the markets closed Tuesday, the U.S. Agriculture Department announced the sale of 300,000 metric tons of corn to the Soviets.

Soybean prices fell as investors purchased old crop futures and sold new crop.

Wheat settled 3 cents to 6.50 cents lower, with the contract for delivery in July at $3.8825 a bushel; corn was 3/50 cents lower to 2.50 cents higher, with July at $2.6125 a bushel; oats were 5 cents to 6.50 cents lower, with July at $1.625 a bushel; soybeans were 3.75 cents lower to 8.50 cents higher, with July at $7.14 a bushel.

Livestock and meat futures were lower on the Chicago Mercantile Exchange, with pork prices lower on USDA reports of increased marketing and high cold storage figures.

Cattle prices dropped in a carry-over from hog prices and weak cash prices.

Live cattle were 0.15 cent to 0.70 cent lower, with June at 68.82 cents a pound; feeder cattle were 0.22 cent lower to 0.10 cent higher, with August at 78.85 cents a pound; hogs were 0.27 cent lower to 0.67 cent lower, with June at 48.15 a pound; frozen pork bellies were 1.83 cents to 2 cents lower, with July at 30.45 cents a pound.

Energy futures prices weakened on the New York Mercantile Exchange as OPEC ministers meeting in Vienna struggled to agree on allotting a proposed cartel-wide oil production increase among its 13 member nations.

Credit

Bond prices finished mixed in quiet trading, with long-term issues posting gains while shorter-term issues slipped.

The Treasury’s benchmark 30-year bond rose 3/8 point, or about $3.75 for every $1,000 face amount. Its yield, which moves inversely to its price, slipped to 8.40% from 8.43% late Monday.

At that level, long-term rates are the lowest since March, 1988. Short-term rates remain near their lowest levels of the year.

Gary Schlossberg, senior economist for Wells Fargo Bank in San Francisco, said long-term bond prices were supported by continued strength in the dollar.

In the secondary market for Treasury securities, prices of short-term governments slipped 1/32 point, intermediates were mixed with some unchanged and others up 5/32 point, and long-term issues were up as much as 3/8 point, according to Telerate Inc., the financial-information service.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.71 to 1,167.85.

In corporate trading, industrials inched higher. Moody’s investment grade corporate bond index, which measures total return on a portfolio of 80 corporate bonds with maturities of five years or longer, rose 0.67 to 320.83.

Rates on new three-month and six-month Treasury bills auctioned Monday were the lowest of the year.

Yields on the new three-month Treasury bills rose to 8.45% as the discount rose 1 basis points to 8.17%. But yields on the new six-month bills fell to 8.34% as the discount fell 7 basis points to 7.91%. Yields on one-year bills rose to 8.46% as the discount gained 2 basis points to 7.85%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.

The federal funds rate, the interest on overnight loans to banks, traded at 9.563%, unchanged from late Monday.