Spotty Gains : Blue Chips Lead Late Rebound; Dow Climbs 11

NEW YORK —  A late rally led by blue chips enabled the stock market to post some spotty gains Wednesday, rebounding from Tuesday’s sharp drop.

The Dow Jones index of 30 industrials, down 45.91 points on Tuesday, rose 11.16 to 2,665.82.

Volume on the New York Stock Exchange came to 180.88 million shares, down from 198.40 million in the previous session.

The market took a tumble Tuesday as the dollar came under pressure in foreign exchange, and some selling carried over into early trading Wednesday.

But many analysts viewed the drop in one sense as a positive development, coming after a long and almost uninterrupted rise to record highs.

At Tuesday’s lows, they said, buyers who had been waiting for a dip in stock prices began to step in.

Could Renew Fears

While the dollar remains a primary influence on the market, Wall Street investors have also begun looking ahead to two economic reports, due Friday, providing a revised government measure of the gross national product for the second quarter of the year and the consumer price index for July.

Most economists estimate that the CPI rose about 0.4%, maintaining its pace of recent months. A figure much higher than that, some brokers warned, might stir inflation fears again and prompt some further profit taking in the market.

The moderate volume in which selling occurred for most of Wednesday heartened some traders, but discouraged others.

The absence of a sharp, dramatic selloff shows that “there may be a little too much complacency and that this pullback could be around for several weeks or more,” said Eugene Peroni Jr., director of technical analysis at Janney Montgomery Scott in Philadelphia. Peroni said the market’s bias could turn sour and its behavior, tied more closely to economic and monetary events, could become more volatile and erratic.

Citicorp fell 2 1/2 to 63 1/8 in active trading. Late Tuesday, the company announced plans for an international stock offering next month of about 17 million shares.

The bank holding company said the sale of additional stock would dilute its 1988 earnings per share by about 7%.

Some Healthy Gains

Hewlett-Packard dropped 2 1/2 to 65, amid some evident disappointment over the size of the quarterly earnings gain posted by the company.

Philadelphia Electric led the NYSE active list, down 3/8 at 22 5/8 on volume of more than 19 million shares. Analysts said much of the activity stemmed from traders acting to capture the company’s quarterly dividend.

Gainers among the blue chips included Merck, up 1 3/4 at 205 3/4; International Paper, up 1 1/8 at 53 3/8; Eastman Kodak, up 1 at 100 1/8, and American Telephone & Telegraph, up 1/8 at 34.

Kenner Parker Toys gained 2 to 49 1/2. New World Entertainment increased its offer to acquire the company to $47 a share from $41.

After trailing most of the day, advancing issues nosed out declines on the NYSE. The exchange’s composite index added 0.26 to 184.38.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over the counter market, totaled 211.36 million shares.

In the bond market, prices drifted lower Wednesday as credit markets continued to focus on a rapidly weakening dollar.

The further dip in bond prices extended Tuesday’s huge losses, which were spurred by the initial plunge in the dollar in foreign exchange trading.

The Treasury’s bellwether 30-year bond, which lost as much as $15 per $1,000 in face amount on Tuesday, was off 7/16 point, or about $4.50. Its yield rose to 8.97% from 8.94% on Tuesday.

“Once again, it’s the (U.S.) currency that is to a great extent driving the market,” said William Brachfeld, executive vice president of fixed-income securities at Daiwa Securities.

The dollar fell Wednesday to a two-month low against the Japanese yen and slipped against other major foreign currencies in prolonged reaction to last week’s news of a larger than expected U.S. trade deficit in June.

“The implication of a lower (U.S.) currency is more inflation,” Brachfeld said.

Traders are concerned that the Federal Reserve could raise interest rates in a move to stabilize the dollar. Bond prices and interest rates move inversely.

In addition, a weak dollar makes dollar-denominated securities, such as bonds and notes, less attractive to foreign investors and could fuel higher inflation by making imports more expensive.

Continued volatility in the currency markets is likely to overshadow the economic statistics to be released in the next few days, said Maria Ramirez, a managing director at Drexel Burnham Lambert.

“People just don’t know what to say,” Ramirez said. “They don’t have a clue as to what to focus on--the market is lacking direction.”

Analysts said bond traders are cautious. “Things could turn on a dime here,” Brachfeld said. “Anything that’s a surprise could turn this market.” A stronger dollar is one factor that could lend direction to the credit markets, analysts said.

Prices of short-term government issues fell between 1/8 point and 5/32 point, intermediate maturities declined between 3/16 point and 9/32 point and 20-year issues were down 5/16 point, according to figures provided by Telerate Inc., a financial information service.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

In corporate trading, industrials and utilities fell 3/8 point in light trading, according to the investment firm of Salomon Bros.

Among tax-exempt municipal bonds, general obligations and revenue bonds were down 3/8 point, Salomon Bros. said. Trading was light.

Yields on three-month Treasury bills were up 6 basis points to 6.06%. Six-month bills rose 3 basis points to 6.19% and one-year bills were up 11 basis points to 6.58%.

The federal funds rate, the interest on overnight loans between banks, traded at 6.675%, unchanged from late Tuesday.