Dow Rises 3.96 Despite Anxiety : Stock Market: Blue chips rebound in afternoon after gloomy inflation, trade deficit reports send index down more than 20 points.

Bad news on inflation and trade unsettled the stock market today but an afternoon rebound enabled the blue chips to eke out a small gain.

The Dow Jones average of 30 industrials, which showed a loss of more than 20 points at 2 p.m. on Wall Street, finished with a gain of 3.96 at 2,571.29.

Declining issues outnumbered advances by about 4 to 3 on the New York Stock Exchange, with 619 up, 830 down and 511 unchanged.

Big Board volume totaled 141.13 million shares, against 110.60 million in the previous session.

The NYSE’s composite index gained 0.26 to 174.88.

At the American Stock Exchange, the market value index sank 2.02 to 319.69.

Two government reports released before trading opened intensified anxiety over the economy’s condition.

The Labor Department said consumer prices rose 0.8% in August, pushed up by the energy price spiral set in motion when Iraq seized Kuwait on Aug. 2.

In a separate report, the Commerce Department said the U.S. merchandise trade deficit jumped a dramatic 75% to $9.33 billion in July.

“I think we’ve had a whole series of economic disappointments.,” said Michael Metz, chief market analyst at Oppenheimer & Co. “The question is whether the Fed opts to fight inflation or fight a recession.”

The Federal Reserve Board is widely believed to be weighing whether to pump life into the economy by lowering interest rates.

The central bank has indicated it would be inclined to relax its monetary policy if White House and congressional negotiators agree on ways to trim the budget deficit. But inflation considerations might stay the Fed’s hand--especially if the Middle East crisis drags on and keeps oil prices rising.

Bond prices fell sharply in early trading today.