NEW YORK, SEPT. 28 -- The Dow Jones industrial average staged a dramatic turnaround today, transforming an early 47-point loss -- and a new 16-month intraday low -- into a 25-point gain by the close.
Although the broader market lagged blue-chip indexes somewhat on the rebound, the negative 7-to-1 ratio of declining issues to advances recorded in the first half-hour of trading slowly shifted to a slight lead by advancing issues by the close.
The sharp early decline in stocks, which dragged the Dow to a session low of 2380, was inspired by falling equity markets overseas, stubbornly resilient oil prices and enhanced fears for the U.S. banking system after five sessions of often severe losses in U.S. money-center bank stocks and other financial equities.
In addition, a greater-than-expected, 1.2 percent drop in the Commerce Department's August index of leading economic indicators further undermined prices.
Most traders said end-of-quarter buying pressures were at least partially responsible for the early rebound and its extension in the afternoon. Failure of the nation's money-center banks to post significant new losses also provided encouragement to the afternoon market.
Continued afternoon firmness in the bond market, which had rallied early on flight-to-quality buying as investors deserted stocks, helped extend a late rally in equities, traders said. As stocks closed, the U.S. long Treasury was up nearly 3/4 of a point.
At the close, the Dow stood at 2452.48, up 25 points on the day and 72 points above session lows. Advances edged declines at the finish by 885 to 688.
New York Stock Exchange volume expanded to a heavy 201 million shares from 182 million during Thursday's decline, also cheering the bullish camp.
"The gravity of such pressing issues as the Mideast crisis and the budget dilemma is reflected visibly in this market, which has been unable to find bottom," said technician Eugene Peroni at Janney Montgomery Scott.
"Today was a classic 'upside reversal' day and easily the most promising action since August," Peroni said. "But the stock market is still without benefit of a focal point from which reasonable valuations can be made. Such valuations seem futile at this point. Analysts are currently scrambling to revise corporate earnings estimates downward. ...
"Today may be the start of a decent rally," Peroni said, "but it's still too early to call."
While 10 of the Dow's 30 blue-chip stocks posted full-point losses at the opening, the picture was very different by the close. IBM rose 2 to 106 3/8, General Electric surged 2 7/8 to 54 1/2, Boeing tacked on 1 7/8 to 41 1/2, Philip Morris added 1 1/4 to 45 1/4, Merck advanced 2 7/8 to 76 1/8 and Westinghouse moved up 2 1/2 to 29 3/4.
Some prominent losers remained, however, in the form of Allied Signal, down 1 1/8 at 27 3/4, International Paper, down 1 at 43 1/2, and USX Corp., down 1 1/4 at 30 1/8.
Among industry groups, money-center banks rallied sharply after five days of deepening gloom. It was partly the refusal of big bank stocks to drop further in the early action that inspired midmorning bargain hunting in the banks as well as the broader market, many traders said.
At the close, Wells Fargo was up 3 at 45 3/4, Security Pacific up 3 at 22 1/2 and First Interstate up 2 3/4 at 22 1/2 among the California money-center banks. Among New York banks, J.P. Morgan rose 2 1/8 to 32 7/8, Chemical gained 1 3/8 to 15 1/2, Manufacturers Hanover added 1 5/8 to 21 7/8, Bank of New York rallied 1 1/2 to 17 5/8 and even Chase tacked on 3/4 to 11 3/4. Insurance companies also rebounded after Thursday's broad shellacking.
The Dow transports rose 13.32 to 841.35, partially thanks to a 6 5/8 gain to 97 1/4 in UAL Corp. The utilities eased 0.12 to 198.57, however, despite a 3/4 gain in the U.S. long Treasury bond.
Among broad stock indexes, secondary averages lagged blue-chip measures somewhat during the rebound off session lows. At the close, the Standard & Poor's 500 was up 5.08 at 306.05, the NYSE Composite up 2.49 at 167.85, the Value Line up 2.00 at 226.37, the Amex Market Value up 2.30 at 307.73 and the Nasdaq Composite up 3.32 at 344.51.