Feared Market Crash Turns Into Big Rally

NEW YORK--Wall Street averted another Black Monday and had a Blue Chip day instead,as some of the heaviest trading in history produced a rally in big-name stocks and losses in many smaller issues.

The Dow Jones average, which represents stock prices of America's 30 biggest industrial companies, rose 88.12 points to 2657.38, erasing nearly half the losses suffered in last week's Friday the 13th plunge.

In spite of the gains in the Dow Jones average, stocks whose prices declined outnumbered those that increased by a 5 to 4 margin in the New York Stock Exchange as a whole. Volume totaled 416.29 million shares, the fourth largest in history.

On Friday, the Dow Jones average suffered its second-biggest point drop ever, falling 190 points and raising fears of a repeat of October 19, 1987, when a Friday decline turned into a Monday rout that knocked a record 508 points off the average.

Indeed, it started to shape up as a repeat of Black Monday, with sharp declines in foreign stock markets and the Dow Jones average falling about 63 points in the first half-hour on Monday.

But after gyrating wildly, the market settled down in the afternoon. Even the losses in the broader market were modest. Monday's 88.12 point gain was the fourth largest one-day point rise ever.

The huge trading volume for the day was exceeded only by the 600 million-share sessions of October 19 and 20, 1987, and the 450 million shares traded October 21, 1987.

In lower Manhattan, tourists lined up early outside the New York Stock Exchange, hoping to get an eyewitness view of the trading spasms.

"I feel like I'm watching a car accident," said John Egan, 24, a New Yorker waiting to get into the visitor's gallery.

But as a sign of the market's underlying strength, stocks held up in spite of a steep decline in the U.S. bond market and the weakness in foreign stock markets.

Stock indexes fell 1.8 percent in Tokyo, 3.2 percent in London and a steep 12.8percent in Frankfurt, West Germany, where onetrader described trading as a "bloodbath."

The dollar fell against most major currencies.

Traders said the stock market benefited fromthe experience gained in the 1987 crash. The NewYork Stock Exchange managed to handle the heavytrading volume because of a big investment intechnology made after the crash.

In addition, traders were soothed by a promiseover the weekend by the Federal Reserve to supplyfresh money to the financial system if necessaryto make sure banks kept loans flowing to traderswho lost money.

It turned out that little action by the Fed wasnecessary. As a precaution, the central bankinjected about $2 billion into the financialsystem on a day when it ordinarily would havedrained reserves.

The Fed injects money into the banking systemby purchasing Treasury securities, putting cashinto the hands of the sellers.

Turmoil continued in the airline sector. DonaldTrump announced he was withdrawing his $7 billionbid for AMR Corp., parent of American Airlines,after the company's stock slid more than $13 ashare. However, he said he would consider a newoffer at a lower price.

It was trouble with the pilot-management buyoutof the parent of United Airlines that sparkedFriday's 190-point plunge in the Dow. The UALCorp. bidders continued scrambling yesterday toput together a new deal as the stock plummeted $53a share to $226.75 in late trading.

At the New York Stock Exchange, "All of thesystems throughout the exchange have functionedextremely well throughout the day," chiefspokesperson Richard Torrenzano said. "There hasbeen no delay of any kind."

There were communications all day between thestock exchanges, the Federal Reserve and theSecurities and Exchange Commission, Torrenzanosaid