11th-Hour Rally in Trading Sends Stocks Up Sharply; Dow Industrials Jump 56.20

NEW YORK —  An explosion of trading in the session’s last half-hour sent stocks sharply higher Tuesday, leaving the Dow Jones industrial average to close at 1,868.37, up 56.20 points.

The last-minute burst, driven partly by computer-tied program trading, carried the Dow to a two-day gain of 101.63 points. The run-up brought a measure of relief to traders after last week’s 143.44-point slide, which had left many broad market indexes below where they stood after Black Monday.

“The market seemed quite strong and in the last half-hour really turned on the afterburners,” said Chester Pado, executive vice president and chief technical analyst with Jefferies & Co. in Los Angeles. The closing activity followed hours of sluggish trading, during which the Dow slipped as low as 20 points below Monday’s close, then edged up and hovered for several hours just above Monday’s closing figure.

Despite the encouragement offered by the 11-hour rally, analysts noted that much of the day’s volume came in activity in two stocks, Pacific Gas & Electric and McDermott International, that have been traded for their large dividends. The stocks were the most heavily traded on the New York Stock Exchange; 47.1 million shares of Pacific Gas changed hands, along with 15.2 million shares of McDermott.

May Confirm Weakness

Volume on the New York Stock Exchange was 227.31 million shares, compared to the 146.66 million shares traded during Monday’s somnolent session. There were 1,142 issues advancing, 465 declining and 371 unchanged.

The broader indexes participated in the advance. The Standard & Poor’s 500-stock index rose 6.15 to 234.91, while the New York Stock Exchange composite index gained 3.19 to 131.42.

Analysts said that, in addition to the program trading, Tuesday’s run-up was aided by the actions of short-sellers--traders who were betting that stocks would decline--who bought stock to hedge their positions. But analysts said there were also signs that institutional investors and foreigners who have recently shunned the market were again investing some cash.

“Some of that money that’s been on the sidelines is getting put back to work,” Pado said.

Last week’s decline confirmed the conviction of many analysts about the market’s long-term weakness. Several saw the price rises of the past two days as evidence of little more than that the market had become “oversold” during last week’s slide.

Trade Figures Awaited

However, Brian Luedtke, technical analyst with Piper, Jaffray & Hopwood Inc. in Minneapolis, saw the rise as a sign that the market is stabilizing in a trading range of 1,750 to 2,000 on the Dow. “Our view is that the market is going to concentrate on that range for several months,” he said.

He said some investors may have been trading stocks on the strength of expectations about the trade deficit figures that are due out Thursday. Last month’s figures showed a significant decline in the merchandise trade deficit, and some analysts are expecting that this month’s number may also represent a positive sign for the U.S. economy.

Prices were lower and trading thin on the bond and precious metals markets. Some analysts said investors are staying out of those markets as they wait for release of the government’s trade figures on Thursday.

At the American Stock Exchange, the market value index rose 3.54 to 236.57. The NASDAQ composite index for the over-the-counter market closed at 297.96, up 3.19.

The Wilshire index of 5,000 equities closed at 2,274.694, up 51.331.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 259.54 million shares.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,147, compared to 2,585 on Monday.

Analysts said they saw strength in a number of sectors of the market, including oil stocks, base metals and technology issues. “The technology stocks showed strength they haven’t seen for some time,” said Jefferies’ Pado.

Among the blue chips, several oil stocks were up, partly on speculation about the companies as possible takeover targets. Unocal gained 2 at to 27 3/8; Phillips Petroleum advanced 3/4 to 11; Amerada Hess gained 7/8 to 23, and Kerr-McGee edged up 5/8 to 31.

Texaco was up 3/4 to 33 5/8 after Trans Worlds Airlines and investor Carl C. Icahn filed for permission to increase their stake in Texaco to more than 25%.

International Business Machines rose 2 to 111 1/2; Procter & Gamble advanced 3 3/4 to 83 3/4; General Motors gained 1 3/8 to 57 3/4, and Minnesota Mining & Manufacturing edged up 1/2 to 59.

Philip Morris rose 3 to 89 7/8, and United Technologies gained 2 1/8 to 32 3/4.

Walt Disney gained 2 5/8 to 54 5/8 following reports that the company has mapped out a strategy that it hopes will help increase earnings by 20% a year.

Federal Express was off 1 7/8 at 39 1/8 after an analyst at Kidder, Peabody & Co. cut his earnings estimate for the company because of a business slowdown in November.

Sterling Drug advanced 2 to 47 after the company announced that a Food and Drug Administration panel had recommended approval of its Milrinone drug.