Dow Rebounds 25 as Bargain Hunters Move In

The stock market recovered from an early plunge and advanced today as investors were lured by bargain-basement prices.

The Dow Jones average of 30 industrials gained 25.00 to 2,452.48.

Advancing issues outpaced decliners by about 9 to 7 on the New York Stock Exchange, with 886 up, 689 down and 393 unchanged.

Big Board volume totaled 201.01 million shares, against 182.69 million in the previous session.

The NYSE’s composite index rose 2.49 to 167.85. At the American Stock Exchange, the market value index stood at 307.72, up 2.29.

The gain was led largely by blue-chip issues and higher prices in the banking sector, where stocks had been hammered for days. The broader market, however, remained mixed.

The session began on a sour note. The Dow Jones industrial average plunged nearly 50 points, piercing the 2,400-level shortly after the opening bell as many big Japanese investors sold stocks. With prices falling sharply overnight in Tokyo and with the first half of Japan’s fiscal year drawing to a close, many Japanese wanted to take their money home, noted Michael Metz, a vice president at Oppenheimer & Co.

Several analysts considered the 2,400 mark on the Dow a critical floor. Sinking beneath that level meant the key barometer had lost 600 points, or lost 20% in value from its peak six weeks ago.

Nervous investors headed for the security of the bond market or held cash from their stock sales. But bargain-hunters keen on cheap blue-chip issues surfaced at midafternoon and pushed the market higher.

Bond prices advanced today as a plunge in the government’s main economic forecasting gauge raised hopes that interest rates would drop.

The Treasury’s closely watched 30-year bond gained 3/8 point, or $3.75 per $1,000 face amount, compounding an advance of 1 1/16 point in Thursday’s session.

The bond’s yield, which declines as the price rises, fell to 8.98% from 9.02% late Thursday.

The impetus for today’s rally was news that the government’s index of leading economic indicators plunged 1.2% in the wake of the Persian Gulf crisis.

The August decline, the steepest drop in nearly three years, raised trader hopes that the Federal Reserve would be forced to lower interest rates to shore up the economy.