Wall St. Breathes a Sigh of Relief as Dow Yo-Yos Up 33 : Rally Spurred by Bargain Hunters in Light Trading

NEW YORK —  Investors breathed a collective sigh of relief today after Friday’s Wall Street debacle turned into a strong gain as the Dow Jones industrial average yo-yoed nervously to a 33-point rise.

Early-day volatility gave way to a late-afternoon buying surge, leaving blue chips higher yet the broad market still somewhat depressed.

The street had been bracing itself for a possible 100-point drop early in the day on top of Friday’s 140-point plunge. But bargain-hunting investors and a firming dollar set the stage for the 33.82-point rise of the Dow to 1,945.13.

In the overall market, however, declining issues led gainers by a slight margin with 752 up, 826 down and 379 unchanged.

Big Board volume totaled 158.98 million shares, down from 197.30 million in the previous session.

Investors ‘Gun Shy’

Analysts said the slim volume proved that investors were still “gun shy” after the pounding at the end of last week and in advance of Friday’s U.S. November trade figures.

The Dow index made wide swings during the morning, from down 19 points to up 28 before settling ahead in the mid-teens by noon.

Analysts said the swings were due to rapid buying and selling, brought on by changes in futures index contracts and prices of underlying cash stocks.

Explaining the Dow’s sharp movements, Eugene Peroni of Janney Montgomery Scott said: “The specialists, who are charged with keeping an orderly market, were tender-footed in early trading. They tried to help buyers, but were stepping aside on the selling.”

Weekend Tension

Tension was heightened through the weekend as parallels were drawn between last October’s scenario and Friday’s decline. But observers found some solace in the reflection that the pre-Black Monday market was widely viewed to be overvalued with many investors weighed down by holdings they had used large amounts of credit to buy.

For the most part, those investors were out of the market when it tumbled Friday--leaving a much tougher core of traders, according to analysts.

In addition, they said, last week’s market was due for a decline after a 113-point run-up during the four previous sessions.

The dollar, which of late has moved in tandem with the stock market, was trading off its session lows after getting some early support in Europe and Tokyo. The U.S. Federal Reserve board also bought the currency.

The dollar was at 1.6367 marks and 128.17 yen, up from session lows of 1.6340 marks and 127.90 yen.

Shifted Gears Friday

The market shifted gears Friday on unsettling economic news. The sharp decline was attributed in part to a Washington Post report that the U.S. budget deficit in fiscal 1989 could rise to $167 billion under certain economic conditions. This would be $31 billion more than the target of $136 billion set by Congress.

Another factor cited by traders and analysts was the announcement that U.S. unemployment fell in December to its lowest since 1979, raising fears of higher interest rates.

If the U.S. economy is strong, the Federal Reserve Board will be more inclined to use higher interest rates to defend the dollar, the analysts said.

Also, there were rumors that the November U.S. trade deficit to be reported Friday could show a gap of $20 billion. Most analysts expect a drop from October’s $17.6-billion deficit but said a gap of $15.5 billion or less is needed to boost the dollar and financial markets.

Earlier in Tokyo, where the trading day begins, the dollar slipped about 1 yen in value to 128.50 yen, while the closely watched Nikkei Stock Average of 225 selected issues lost 294.13 points, closing at 22,578.43.