Dow Jumps on Bargain Hunting, Climbs 23.25

The stock market pulled out of its recent slide with an afternoon rally today.

The Dow Jones average of 30 industrials, down 91.30 points in the two previous sessions, rebounded 23.25 to 2,692.62.

Advancing issues outnumbered declines by about 8 to 7 on the New York Stock Exchange, with 793 up, 709 down and 463 unchanged.

Big Board volume totaled 186.07 million shares, against 140.59 million in the previous session.

The NYSE’s composite index gained 1.66 to 188.37.

Analysts said blue chips in particular benefited from “bargain hunting” after their recent decline and better-than-expected auto sales reports for early January.

Many other stocks, however, remained on the defensive amid recession fears and worries prompted by weakness in the Japanese stock market.

The 225-issue Nikkei Stock Average fell 666.41 points, or 1.8%, to 36,850.36. On Friday, before a long holiday weekend in Japan, the Nikkei lost 656.36 points.

Analysts said that result heightened concern that rising interest rates and persistent inflationary pressures might lead to a business slump in many or all of the industrialized countries.

They also said traders were still trying to assess the financial fallout from Monday’s long-expected filing for bankruptcy protection by Campeau Corp.’s Federated and Allied retailing operations in the United States.

Bond prices fell in early trading today, reflecting what economists called worries about inflation and interest rates.

The Treasury’s closely watched 30-year bond was down 17/32 point, or about $5.30 per $1,000 in face value, by midday. The bond’s yield, which rises when prices fall, increased to 8.24% from 8.17% on Friday. The government bond market was closed on Monday for Martin Luther King’s birthday.

Analysts said the U.S. credit market was responding partly to the Tokyo bond market, which experienced a sharp sell-off today amid fears about rising interest rates.

“With interest rates rising in Tokyo and elsewhere there are heightening inflation concerns worldwide,” said Marshall B. Front, an economist at the Chicago investment and mutual-fund management firm of Stein Roe & Farnham.

“At this point in the U.S. market, we can’t seem to find a level where investors will commit.”

Bond investors fear a rise in inflation, which erodes the value of fixed-income securities such as bonds and notes. An acceleration of inflation could also prompt the Federal Reserve to tighten credit and encourage higher interest rates, further depressing bond prices.

Yields on three-month Treasury bills were up to 7.83% as the discount rose 11 basis points to 7.59%. Yields on six-month bills had advanced to 7.91% as the discount rose 9 basis points to 7.52%. Yields on one-year bills rose to 7.86% as the discount added 9 basis points to 7.33%.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8 3/16%, up from 8 1/16% late Friday.