US blue-chip stocks bounced back yesterday, recovering some of the ground lost during Tuesday's 3.7 per cent fall on Wall Street.

The Dow Jones Industrial Average closed more than 60 points, or 0.6 per cent, higher at 9,856.53, helped by lower oil prices which boosted airlines and transportation stocks.

"The lower oil prices have to be a plus, because they mitigate some of the concerns out there about inflation," said Mr Jack Shaughnessy, chief investment strategist at Advest.

Oil futures dropped back after Tuesday's surge to nine-year highs after news that there were large builds in US crude and gasoline inventories, and that OPEC powers Saudi Arabia and Iran sounded more open to boosting oil output. The Dow's gains came the day after a profit warning from consumer products giant Procter & Gamble combined with inflation and rate worries to knock the Dow to its fourth-biggest point loss ever, down 374.47 points.

But the index managed to move back into positive territory despite a warning to US banks from the chairman of the Federal Reserve, Alan Greenspan. He is worried about the tendency of US banks to assume that the current economic good times will last forever, causing them to get excessively lax in their lending.

By contrast, "new economy" stocks saw a rare stumble yesterday, with recent market darlings like semiconductors, biotechnology, fibre optics and telecommunications finishing lower.

But the sector later recovered its poise and the Nasdaq Composite Index, which earlier had slipped by as much as 125 points, closed nearly 50 points, or one per cent, higher at 4,897.17.

In Dublin, shares closed nearly 0.7 per cent lower as Wall Street's recent jitters took their toll on most European markets.

In London, Europe's biggest stock index, the benchmark FTSE 100, closed down 0.86 per cent. In Frankfurt, the DAX index was down 0.97 per cent, and in Paris, the CAC-40 was off 1.5 per cent.