CRISIS IN THE PERSIAN GULF : Program Trading Pushes Dow 30.20 Higher on Light Volume

An afternoon rally sent stock prices higher Monday after a steep opening slump, but trading was reduced by a Wall Street power outage that curtailed operations at the American Stock Exchange and several brokerages.

The Dow Jones index of 30 industrial stocks rose 30.20 to 2,746.78. But declining issues narrowly outnumbered advancing ones in nationwide trading of New York Stock Exchange-listed stocks, with 726 up, 766 down and 479 unchanged.

Volume slowed dramatically, totaling 122.82 million shares on the Big Board, down from 145.34 million Friday.

The market opened with a thud, with the Dow plunging as much as 32 points in the first half hour. The drop followed steep losses overseas on continued worries about the Mideast crisis. The Tokyo Stock Exchange’s Nikkei index posted its fourth-largest percentage drop ever, losing 1,153.12 points, or 4.2%, to 26,176.43. It was the lowest close in two years.

But prices in New York began to pick up in the afternoon in a “light-volume rally,” said Dudley Eppel, analyst at Donaldson, Lufkin & Jenrette Securities. He said the market had reached an “oversold” state, and some investors came in to bargain hunt.

Computerized program trading also was a big influence. “In the light-volume days the computer controls the tape. It takes it right out of our hands,” Eppel said of the program trading.

Many analysts advised against reading too much into the rally, noting that the market remains hostage to events in the Mideast and to economic concerns. Foreign markets’ dismal showings may weigh on Wall Street as the week progresses.

Trading on the American Stock Exchange, as well as on the New York Mercantile Exchange and the Commodity Exchange, was cut off shortly after 1 p.m. EDT after a fire knocked out power in Manhattan’s financial district. The exchanges were forced to halt trading for the rest of the day.

The NYSE wasn’t affected, but many brokerages said operations were curtailed.

Market highlights:

* Leading the Dow higher were IBM, up 1 3/4 to 103 3/4; Kodak, 2 1/2 to 43 1/2; Merck, 2 1/8 to 86 7/8; and Procter & Gamble, 1 7/8 to 81 3/4.

* Some growth stocks continued to rebound from their recent declines. Compaq Computer rose 2 3/8 to 56 1/4, Disney added 2 1/4 to 109 and Home Depot gained 1 1/4 to 35 3/4

* Investors continued to snap up shares of drug and food firms, classic “defensive” stocks in a recession. Ralston Purina jumped 2 1/2 to 94, Heinz added 7/8 to 33 3/8 and Bristol Myers rose 1/2 to 61 3/4.

* Biotech stocks, red-hot before the recent market plunge, roared back. Amgen jumped 3 1/8 to 47 on the first day following its 2-for-1 stock split. Chiron rose 1 3/4 to 38 1/4, Genzyme gained 1 5/8 to 18 and Centocor leaped 1 3/4 to 40 1/2.

* Oil stocks were mostly higher. Arco rose 2 1/4 to 137 1/4, Unocal added 5/8 to 32 5/8 and Mobil jumped 1 1/4 to 67 1/8. Meanwhile, gold stocks soared as the price of gold rocketed. ASA jumped 2 1/4 to 54 1/4 and Newmont Gold rose 2 1/2 to 53 5/8.

* Big gainers among Southland stocks included electronics distributor Marshall Industries, up 1 to 24 1/8; computer firm AST Research, 1 1/4 to 21 1/8, and Western Waste, 1 1/4 to 19 1/4.

* Midway Airlines rocketed 2 1/8 to 9 5/8 on a report that American Airlines may be looking at bidding for Midway.

CREDIT: Bond Prices Hurt by Inflation Fears

Long-term government bond prices fell Monday on inflation worries and oversupply concerns in a session abbreviated by a power outage in lower Manhattan.

The Treasury’s benchmark 30-year bond was down 5/16 point, or about $3.13 per $1,000 face amount. Its yield rose to 8.81% from 8.79% late Friday.

Trading, which was light, came to a virtual standstill after a power outage shut down most of New York’s financial district, including almost all primary dealers of government securities.

Traders also were awaiting a series of economic reports due later this week that could provide more evidence of economic weakness, and thus point to further Federal Reserve moves to lower interest rates. The reports include today’s release of July retail sales and Thursday’s report on consumer prices in July.

The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.125% when power failed around 1 p.m. EDT. That was up from 8% late Friday.

CURRENCY: Dollar Pulled Down by Interest Rates

The U.S. dollar slumped against major foreign currencies, which are expected to strengthen as interest rates rise overseas while rates fall here.

The dollar has been under pressure in recent weeks because of weakness in the U.S. economy, and many traders expect the Federal Reserve will eventually move to lower interest rates in an effort to stimulate the economy to keep it from a recession.

In New York, the dollar fell sharply against the German mark, buying 1.578 marks versus 1.589 on Friday. Against the yen, the dollar was at 150.25 versus 150.40 Friday.

The dollar also lost ground against the British pound. In New York, the pound rose to $1.8825 from $1.8735 late Friday.

COMMODITIES: Grain Prices Fall After Rain Arrives

Grain and soybean futures fell sharply and livestock and meat futures were mixed. Rain fell Monday in the Mississippi Delta region, where drier-than-normal conditions had raised concerns about the soybean crop.

Weather forecasts predicted a continuation of beneficial crop weather in the Midwest, where the bulk of corn and beans are grown.

In a six-to-10-day forecast released after the close of grain trading, the National Weather Service predicted normal- to above-normal temperatures and normal precipitation in the Midwest for the first half of the week.

AFTERNOON RALLY

The Dow industrials slid more than 32 points in the first half-hour of trading but struggled back before jumping 30 points near the close. Friday close: 2,716.58 Monday close: 2,746.78 up 30.20