Blue-Chip Rebound Boosts Dow

Blue-chip stocks recovered from a steep morning selloff to post moderate gains on Thursday, although broader market indexes languished.

The Dow Jones industrial average ended 11.27 higher to close at 4,701.42. The blue-chip index plunged 41 points in the first 15 minutes of trading, then slowly trimmed its losses throughout the session.

Stocks tumbled after the Labor Department said jobless claims dropped by 51,000 in the week ending July 29, the largest weekly decline in more than a year.

That sign of growth in the economy was bad news for investors hoping that the Federal Reserve would cut interest rates again this month in a bid to stimulate growth.

The jobless-claims data came one day after the market stumbled on concerns that a rising dollar might jeopardize U.S. exports, particularly in the important technology sector.

Trading volume was moderately heavy at 353.1 million shares as of 4 p.m., compared with 374.29 on Wednesday.

Some of the stocks that moved substantially Thursday:

NYSE

Southern Pacific Railroad rose 2-5/8 to 22-1/4.

Union Pacific rose 5/8 to 65.

The Wall Street Journal reported Thursday morning that Union Pacific was in talks to acquire Southern Pacific for more than $3.5 billion. After the close of trading on Thursday, the companies announced that Union Pacific will buy Southern Pacific in a deal valued at about $5.4 billion, forming the largest railroad in North America.

Delta Airlines rose 1-1/8 to 75-1/2.

UAL rose 5/8 to 144-3.4.

Alaska Air rose 1/2 to 19.

Continental Airline’s Class A shares fell 3/4 to 25.

Continental Airline’s Class B shares fell 5/8 to 25-1/8.

Gruntal & Co. upgraded five airline stocks. Gruntal said the issues have become cheap, especially after a steep drop on Wednesday tied to cautionary remarks released by Salomon Brothers.

Hewlett-Packard rose 1-3/4 to 74-1/4.

The computer maker cut prices on its HP NetServer Series and disk drives in the United States by as much as 25 percent, effective immediately.

NASDAQ

Microsoft rose 2-1/8 to 91-1/8.

Although the company’s new Windows 95 operating system was favorably reviewed in The Wall Street Journal, another Journal story suggested that companies will be slow to adopt the system. Windows 95 is scheduled to be shipped for the first time on Aug. 24.