Dow Soars 47.30 as a Technical Bounce Becomes a Snowball

The stock market ended sharply higher in fairly active trading today, reversing a five-session slide.

The Dow Jones average of 30 industrials rose 47.30 points to end at 2,590.54.

Advancing issues outnumbered decliners by about 5 to 2 on the New York Stock Exchange, with 1,107 issues up, 445 down and 411 unchanged.

Big Board volume totaled 189.66 million shares, against 186.03 million in the previous session.

The NYSE’s composite index rose 3.07 to 181.50.

At the American Stock Exchange, the market value index added 4.57 to 350.07.

Stocks rallied shortly after the opening on what some Wall Street analysts said was a technical bounce, then moved steadily higher throughout the session. The Dow had fallen more than 72 points since last Wednesday.

“What’s going on is nothing more than a market that got more oversold than at any time since October, 1987,” said Ralph Bloch, chief market analyst for Raymond, James & Associates in St. Petersburg, Fla.

Wall Street analysts said the market also gained strength from a rallying bond market after recent steep declines. A rebound in corporate junk bonds also spilled over into the stock market.

Losses by RJR Holdings Capital Inc., which had dragged the junk bond market lower in recent days and helped pressure takeover stocks, gained ground for the second day.

Interest rate worries, which had plagued the market in recent days, also subsided, thanks in part to today’s report by the Commerce Department that the December index of leading indicators went up 0.8%. Consensus expectations were for a rise of about 0.5%.

The index is the latest indication that the economy, while weak, can avoid a recession.

“As interest rate concerns subside, stocks are doing better,” said Theodore Tung, senior vice president with National City Corp. in Cleveland. “It’s all keyed to interest rates.”

Bond prices were mostly higher in early trading today after Chicago-area purchasing executives released a survey indicating that the economy is continuing to weaken.

A weaker economy is bullish for the bond market because it increases the likelihood of the Federal Reserve allowing interest rates to fall. Bond prices rise when rates decline.

The Treasury’s benchmark 30-year bond rose 3/16 point, or $1.88 per $1,000 face amount, while its yield dropped to 8.53% from 8.55% late Tuesday.

Bond traders said there was little reaction to the Commerce Department’s release of its leading indicators figure for January this morning. The figure, regarded as the government’s main economic forecasting gauge, jumped a strong 0.8% in December, indicating that the economy may avoid a recession this year.