NEW YORK — News of a decline in the U.S. trade deficit acted like a tonic for the recuperating stock market on Thursday and thrust the Dow Jones industrial average up 60.61 points to 1,960.21 in its seventh-largest one-day gain in history.
The market, which has been increasingly nervous about the trade imbalance, jumped sharply in early trading and held on to its gains through the day. By the close, the average had risen 3.21%. Stocks lost only a little ground in mid-afternoon from the day's high despite word of a slowdown in negotiations in Washington aimed at lowering the U.S. budget deficit. (Story on Page 23.)
Back to Monday's Level
The day's gain followed a 21.05-point advance Wednesday and brought the Dow average back up to about where it had stood when trading began Monday morning.
Analysts were cheered by the breadth of the rally, which included the stocks of many smaller companies as well as those of the 30 dominant blue-chip concerns whose stock prices are reflected in the Dow index. On the New York Stock Exchange, 1,312 stocks rose during the day, 371 declined in price and 317 were unchanged.
The encouraging trade news came from the Department of Commerce, which reported that the U.S. merchandise trade deficit had decreased slightly more than expected, to $14.1 billion in September from $15.7 billion in August. Some analysts believe that concern about the excess of U.S. imports over exports, along with worry about the federal budget deficit, was a key reason for the Oct. 19 collapse of the stock market.
Thursday's trade figures pushed up the dollar also. The currency, which has recently traded at postwar lows, was quoted in late New York trading at 1.6885 West German marks, up from 1.6765 a day earlier. The dollar rose against the Japanese currency also, to 135.835 yen, up from Wednesday's 135.05 and Tuesday's 134.55.
Also encouraging was the fact that, unlike the case during some recent sessions, the stock market's advance did not cause sellers to dump stocks, which would have forced the market back down, analysts said.
"It's a good sign when the market can climb like that without bringing on heavy volume," said Marc Pado, technical analyst at the Jefferies & Co. brokerage firm in Los Angeles. "Recently, that kind of rally has brought in sellers right away."
Some big investors who have been staying out of the action recently were heavily investing in the market Thursday, analysts said.
Delay in Budget Plan
The only slight setback occurred when congressional budget negotiators disclosed that they would not complete a draft of a budget-reduction plan Thursday or today, as they had expected.
At Thursday's close, the Dow index was up 13% from the low of 1,738.74 it reached on Black Monday, Oct. 19. However, it was still off 28% from its record high of 2,722.42, reached Aug. 25.
Volume for the day on the New York Stock Exchange was 207.3 million shares, compared with 147.9 million Wednesday, when the Veterans Day holiday reduced trading.
Traders said the market got some help in its advance on Thursday from so-called program trading, the computer-aided investment moves that some critics have blamed for making Black Monday worse than it would otherwise have been. Such trading was banned after the crash but was allowed to resume Monday. In the most popular form of program trading, investment firms link up to the New York Stock Exchange's automatic trade system to execute trades nearly instantaneously.
Crash Being Probed
But some analysts said program trading was light Thursday. They said the large investment firms that most often use such techniques are not using them heavily for fear of further arousing critics while several investigations of the crash are still under way.
"They are playing possum," contended Gene Jay Seagle, analyst with the Gruntal & Co. brokerage firm in New York. "I don't think you're going to see them do anything that would bring the regulators down on their heads just now."
Seagle, more optimistic than many analysts, asserted that the day's advance was part of a trend that will carry the Dow index back up to the 2,200 level. "We may have seen the shortest bear market in history," he said.
Other indexes showed strong gains, with the Standard & Poor's 500-stock index up 6.63, to 248.52, and the New York Stock Exchange Index up 3.42, to 138.88. The American Stock Exchange Index rose more than five points and the NASDAQ over-the-counter index moved ahead about 6.25 points.
Gains Spanned Market
Analysts said that gains spanned most sectors of the stock market.
Overseas markets also rose strongly. London's Financial Times 100-share index jumped 63.2 points, or 3.9%, to 1,702.5, and the Tokyo exchange's 225-share Nikkei index climbed 509.74 points, or 2.4%, to close at 21,546.50. In early trading today, the index rose an additional 731 points.
On the New York Stock Exchange, General Motors was up $2.625 to $60 on its announcement that it plans to increase auto exports to Japan next year.
International Business Machines advanced $3 to $122.25, General Electric gained $2.375 to $46.25, Goodyear Tire & Rubber rose $2.50 to $49.625 and Minnesota Mining & Manufacturing advanced $4.125 to $60.50.
Sears and Ford Up
Sears, Roebuck rose $1.625 to $36.75 and Ford Motor Co., which said it plans to buy back an additional $2 billion of its shares, moved up $2.75 to $74.50.
Southland Corp. advanced $3.25 to $57.25. The stock has bounced back since dropping sharply on news that Southland would postpone a bond offering it had planned to make in connection with a leveraged buyout.
Walt Disney Co., which reported a gain in third-quarter earnings, moved up $1.75 to $53. Texas Instruments gained $2.25 to $43.25 after it reported that it had settled a semiconductor patent dispute with the Samsung Group of South Korea.