Dow Recovers From Decline, Rises 30.80 : Market Overview

* Stocks snapped back from their dive earlier this week, aided by bargain hunting in smaller stocks. The Dow Jones industrials climbed 30.80 points, or 0.9%, to 3,324.08, while the NASDAQ composite of smaller stocks leaped 1.3%.

* The dollar jumped sharply, but traders said the rally was technical and won’t last.

Stocks

The rally built steam through the day, and the Dow at its peak was up more than 40 points.

David Holt, analyst at Wedbush Morgan Securities in Los Angeles, noted that “we saw a little bit of nibbling” on Wednesday, when the Dow rallied back from a 20-point loss to close off less than 2 points.

“That was carried over to (Thursday) morning. Equities were very strong in Europe, and the dollar was doing very well, for a change,” Holt noted.

At the close, winners beat losers by 12 to 5 on the New York Stock Exchange. Big Board volume came to 209.2 million shares versus 201.03 million Wednesday.

In the NASDAQ market of smaller stocks, winners also swamped losers by nearly 2 to 1.

Though stocks have been under pressure in recent weeks because of economic worries, analysts still insist that falling interest rates will bring buyers back to the market.

“There is no alternative anymore except the stock market,” said Charles Lewis, a portfolio manager at Shearson Lehman Bros. “The opportunities of capital appreciation and income are in the stock market.”

Alfred Goldman, strategist for A. G. Edwards, said that after the Dow’s 44-point drop on Tuesday, “the market got oversold, and because the long-term trend is positive, buyers came in.

“This is an impressive day,” he added about Thursday. “It’s been a broad advance with good volume and good leadership. It shows the trend of the market is still up.”

Among the market highlights:

* Many industrial issues that had been sold off in recent weeks bounced back. Auto stocks led the rally, with Ford up 1 3/8 to 44 3/8, GM up 7/8 to 41 1/4 and Chrysler advancing 3/4 to 19 7/8.

Other industrial gainers included Caterpillar, up 2 1/4 to 52 3/8; Monsanto, up 2 to 55 1/4; Phelps Dodge, up 1 5/8 to 47 1/2; Asarco, up 2 1/4 to 29 3/4; Conrail, up 3 to 89 1/2, and Georgia-Pacific, which rose 1 3/8 to 55 7/8.

* Many beaten-down tech stocks advanced. Cadence Design rose 1 to 20 1/2, Novell added 2 to 53 1/4, Micropolis jumped 3/4 to 8 1/2, and Conner Peripherals zoomed 1 1/8 to 19. Conner said second-quarter earnings rose 71%.

* Retailers were strong despite mixed June sales reports. Among the leaders were May Department Stores, up 1 3/8 to 54; Penney, up 1 1/4 to 70 3/4; Melville, up 1 3/8 to 46 1/8; Ann Taylor, up 1 1/8 to 19 7/8, and Ross Stores, up 3/4 to 11 3/4.

Among the losers, MacFrugal’s Bargains (formerly Pic N Save) plunged 1 7/8 to 10 5/8 after reporting June same-store sales down 5.5%. Also, Limited lost 1/2 to 20 after it said same-store sales fell 4%.

* Biotech stocks helped drive the NASDAQ rally. Immune Response advanced 1 1/2 to 27 5/8, Immunex rose 2 to 31 1/4, Gensia jumped 2 7/8 to 41 3/4, and Amgen added 1 1/4 to 63.

Elsewhere in health care, Humana rose 1 to 23 1/4 after saying it may split in two, separating its hospital and health care plan operations.

In foreign markets, Tokyo’s Nikkei average closed up 248.40 points, or 1.5%, to 16,848.66 as buyers trickled back in.

In London, the Financial Times 100-share average rose 25.3 points to 2,497.9. Frankfurt’s DAX average finished 6.46 points higher at 1,757.64.

In Mexico City, the Bolsa index added 7.92 points to 1,590.25.

Credit

Bond yields slipped again, as traders said most investors were sidelined awaiting today’s report on wholesale prices for June.

There was little reaction to a Labor Department report Thursday showing that the number of Americans filing new claims for unemployment benefits fell by 4,000 at the end of June. The report was in line with expectations.

The Treasury’s 30-year bond rose 1/8 point, or $1.25 per $1,000. Its yield eased to 7.59% from 7.60% Wednesday.

Peter McTeague, fixed-income analyst with Thomson Financial in Boston, predicted that today’s inflation report will show inflation in check and “be the catalyst to propel bond prices higher and yields lower.”

Analysts noted that yields have continued to fall in recent days despite a glut of new government and corporate securities. Buyers’ strong interest is a sign that many believe that interest rates could continue lower amid weak economic statistics.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3.75%, down from 6.00% late Wednesday, which was skewed by technical factors.

Currency

The dollar rose in an active technically driven rally, but many traders said they expected the gains to be short-lived.

The dollar shot up to 1.513 German marks in New York from 1.489 Wednesday, and to 125.60 Japanese yen from 124.70 yen.

The dollar rallied early in the day after French Economics Minister Michel Sapin said France and the United States have agreed that the dollar has fallen far enough.

The dollar kept its strength despite reports that members of Germany’s Bundesbank were comfortable with the German mark’s recent rise in value.

Earl Johnson, vice president at Harris Trust & Savings Bank in Chicago, said the technical rally doesn’t mask the fundamental problems facing the dollar. It is burdened by a weak U.S. economy, an uncertain presidential race and unfavorable comparisons to higher interest rates in other countries, Johnson said.

“As far as I’m concerned, the sentiment still is very bearish for the dollar,” Johnson said.

Commodities

Cattle futures rose sharply on the Chicago Mercantile Exchange as wholesale beef prices firmed.

Paul Georgy, an analyst with Allendale Inc. in Chicago, attributed the surge in live cattle futures to the realization by traders that the cash markets remained firm while the pits turned bearish during the last two sessions.

“I think the firm cash prices had the bears a little nervous,” he said.

Live cattle for delivery in August settled 1.25 cents higher at 73.37 cents a pound.

Elsewhere, oil finished mixed, with light, sweet crude for August at $21.40 a barrel, down 1 cent from Wednesday at the New York Merc.

Precious metals futures were higher on New York’s Comex, with the pace set by bargain hunting in silver--which had plunged earlier in the week.

September silver jumped 4.2 cents to $3.95 an ounce, while gold for August was $1.20 higher at $348.70.