Dow Rebounds From Dive, Closes Unchanged

Stocks bounced back from a late-session dive with bonds on Friday, as comments by two Federal Reserve officials further diminished hopes for an interest-rate cut.

The Dow Jones industrial average ended exactly where it began, at 4,641.55, after a wild session that wrenched the blue chip index down nearly 30 points as late as 2:30 p.m.

New York Stock Exchange volume was heavy at 425 million shares. That was significantly above the 381 million logged on Thursday and pushed the Big Board’s weekly volume to just above 2 billion shares, nearly equaling the record of 2.3 billion set during the week of the October 1987 stock crash.

Stock traders took their signals partly from the bond market, where the benchmark 30-year issue toppled more than 1-1/4 points, pushing interest rates sharply higher. The bond market was reacting to comments from Federal Reserve Vice Chairman Alan Blinder that a recession isn’t likely.

Blinder has been one of the first Fed policymakers to argue for easing as a way to stimulate the economy. He echoed earlier comments by Chicago Fed President Michael Moskow.

Bond traders took both officials’ comments to mean that the central bank is not likely to ease further, after nudging rates down 1/4 point earlier this month.

Some of the stocks that moved substantially Friday:

NYSE

USAir Corp. rose 1/2 to 12.

Second-quarter earnings were nearly eight times higher than last year, boosted by improved industry conditions and cost reductions. The carrier earned $1.47 per share, compared with a loss of 9 cents a year ago.

Westinghouse fell 1/4 to 12-7/8.

An article in The Wall Street Journal suggests that the company’s proposed $5 billion cash offer for CBS Inc. would return it to a diversified strategy and away from a plan set two years ago to concentrate on its core power-equipment business.

Compaq rose 1/2 to 49.

Hambricht & Quist upgraded the stock to “strong buy” from “buy,” a day after the computer maker announced second-quarter net profits of 90 cents a share, up from 78 cents a year ago, and said its inventory is under control.

Bank of Boston fell 1-7/8 to 40.

Corestates Financial fell 1-1/8 to 33-7/8.

PaineWebber downgraded the two stocks after The New York Times reported that the two companies were contemplating merging into a $70 billion company, ranking it among the 15 largest banks in the country.

NASDAQ

Microsoft fell 3 to 93-1/8.

The Justice Department withdrew a subpoena tied to its investigation of Microsoft’s on-line business venture, but did not indicate that it would suspend the investigation. Meanwhile, analysts raised earnings projections for 1996 but predicted flatter growth for 1997.

AMEX

Forest Labs fell 3 to 42-3/8.

A Food and Drug Administration committee rejected the company’s Monurol treatment for urinary tract infections, citing the high incidence of diarrhea in clinical trials. Merrill Lynch downgraded the stock to “neutral” from “above average,” and Morgan Stanley cut it to “neutral” from “outperform.”