Bargain Hunters Help Dow Rebound 14.96

NEW YORK —  Investors looking for bargains perked up Wall Street on Tuesday, sending stocks modestly higher after Monday’s sharp decline.

The Dow Jones industrial index closed up 14.96 points at 2,597.13, after briefly rising above the 2,600 level.

On Monday, the Dow 30-share index dropped 47.34 points--its sharpest fall since Oct. 13--after fears of higher interest rates and concern about weak corporate profits triggered a wave of selling.

But bargain hunting, notably for blue chips and technology issues, and strength in bonds pushed stocks higher Tuesday.

“The bond market getting stronger encouraged people,” said Ed Laux, equities trader at Kidder Peabody & Co. “A lot of the blue chips moved up. Selling pressure is not around.”

Bonds rallied on an announcement that the Federal Reserve was adding temporary reserves to the banking system. Some analysts said the central bank’s move suggested it was trying to nudge interest rates lower.

Investors interpreted the Fed’s action as evidence that the next move could be an easing of the discount rate, said Michael Metz, equities analyst with Oppenheimer & Co. The discount rate is the interest the central bank charges its member banks.

“Investors were in the mood to listen to favorable rumors and seized on this as a rationalization to nibble a bit,” said Metz, adding that such an interest rate move by the Fed was unlikely.

Advancing issues outnumbered decliners on the New York Stock Exchange, with 813 issues up, 662 down and 496 unchanged.

Big Board volume came to 163.00 million shares, up from 135.48 million on Monday.

Analysts said program trading, a computerized form of buying and selling large blocks of stocks, has remained a factor in price movements but did not cause wide price swings in the last two sessions.

Among the most actively traded issues on the NYSE, Tosco rose 7 1/4 to 25 1/8 on reports that several companies had expressed an interest in buying the company or its refinery in Northern California. Philip Morris climbed 1/8 to 40 7/8; Chrysler gained 1/8 to 20, and IBM rose 3/4 to 97 3/8.

Chemical Bank, meanwhile, lost 1/8 to 31 1/8; BankAmerica declined 3/8 to 27 3/8, and Pinacle West lost 7/8 to 8.

Stock prices on the Tokyo Stock Exchange closed lower for the third straight session, with the Nikkei 225-share average falling a hefty 163.54 points to close at 35,270.46.

Stocks in London rose in slow trading. Technical factors and less fear of an imminent hike in British interest rates helped prices. The Financial Times 100-share index finished up 8.6 points at 2,178.2.

Credit

Bond prices surged in the credit markets as a fickle market reversed its perception of what the Federal Reserve’s credit policy is likely to be in the near future and began to anticipate a decline in interest rates.

The Treasury’s closely watched 30-year bond jumped about a point, or $10 for every $1,000 in face value. Its yield, which falls when prices rise, dropped to 7.86% from 7.95% late Monday.

On Monday, speculation that the Fed wasn’t likely to relax credit in the near future tipped bond prices lower. But analysts said that view was reversed around midday Tuesday after the central bank unexpectedly injected $2 billion of reserves into the market.

“We saw yesterday’s bearishness turn into today’s bullishness,” said John Sebastian, an executive vice president at Clayton Brown & Associates in Chicago.

Many traders now see increased chances for an easing sometime soon in the Fed’s credit policy, which would encourage lower interest rates.

The market also got over Monday’s nervousness about coming Treasury auctions.

The Treasury on Tuesday postponed $40 billion in auctions because of congressional failure to raise the debt limit. On Monday, the Treasury had postponed its weekly bill sale.

House Speaker Thomas S. Foley (D-Wash.) said leaders are hoping to pass a new debt ceiling in time for President Bush to sign it today.

That would mean the auctions could start Thursday or Friday, said Mitchell Held, chief financial economist at Smith Barney, Harris Upham & Co.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 8.50%, down from 8.688% late Monday.

Currency

The dollar weakened Tuesday against all major currencies, reflecting concern that U.S. interest rates are heading lower.

Gold prices, meanwhile, rose sharply here and abroad.

On the Commodity Exchange in New York, gold bullion for current delivery closed at $386.20 an ounce, up $4.70 from Monday. Republic National Bank of New York quoted a late bid for gold at $384.75 an ounce, up $4.50 from Monday.

Currency traders said worries that the Federal Reserve might be easing its credit policies, in the face of recent evidence showing an economic slowdown, depressed the dollar’s value but supported gold prices.

In Tokyo, where trading ends before Europe’s business day begins, the dollar closed up at 143.63 Japanese yen from 143.45 yen Monday. It traded at 143.45 yen in London, and at 142.95 yen in New York, down from 143.85 yen.

The dollar was also weaker against the British pound. Sterling rose to $1.5810 from $1.5795 in London late Monday, and to $1.5865 in New York from $1.5765 late Monday.

Commodities

Sugar futures prices climbed sharply on New York’s Coffee, Sugar & Cocoa Exchange as demand continues to outstrip supplies on the world market.

On other markets, copper and precious metals futures surged, pork and livestock futures gained, energy futures were mostly higher and grains and soybeans were mixed.

Sugar futures settled 0.22 to 0.50 cent higher, with the contract for delivery in January at 14.40 cents a pound.

The market continued to show concern over the availability of Brazilian sugar despite the announcement Tuesday by government officials that Brazil will honor 492,000 metric tons of export contracts.

Adding to the surge in prices was the sale of a large block of sugar to Cuba, said Erik Dunlaevy, an analyst with Balfour Maclaine Corp. in New York.

Reports that miners at Codelco’s Chile operations will vote to strike this week sent copper prices up sharply on New York’s Commodity Exchange.

Analyst Jim Steel of Refco Inc. in New York noted that the market was ready for a price surge because of the steep decline in copper prices in recent weeks.