Stock Rally Continues as Dow Gains 17

Bullish investors drove Wall Street shares higher Wednesday, extending the Dow index’s spectacular 75-point advance of Tuesday, on expectations that the market’s month-long correction may have run its course, brokers said.

At the close of trading, the closely watched average of 30 industrial stocks stood at 2,585.67, up 17.62 points.

Volume on the Big Board came to 220.28 million shares, compared to 209.51 million shares on Tuesday.

Gainers outpaced losers by about 9 to 5 among New York Stock Exchange-listed issues.

Some analysts said the two-day advance marked the start of a new upward surge for the market, reversing the month-long decline that saw the Dow average dropping by 8.4% from its Aug. 25 peak of 2,722.42.

Dow Up 75 on Tuesday

But others suggested that the rally was vulnerable--and that the recent correction may not yet have ended.

Trading was volatile.

The Dow industrials, which had picked up a record gain of 75.23 points on Tuesday, slumped by about a point by the end of the first half-hour.

Analysts blamed profit taking and market disappointment over early government reports that consumer prices rose more than expected in August, while orders for durable goods declined.

But the market quickly pulled out of its slump, moving into positive territory and staying there--with some wide fluctuations--for the rest of the session.

Eugene Peroni, director of technical research at the Janney Montgomery Scott securities firm in Philadelphia, said the fact that the market managed to hang on to a solid gain by the end of the day “certainly showed some conviction--and that’s the important thing.

“There wasn’t a strong inclination to take profits,” he said. “The market’s interday backing and filling was healthy and helpful in closing the door to new lows.”

Peroni said he expects the Dow industrials to pick up another 600 to 800 points in the next three or four months, as investor enthusiasm over earnings reports overshadows worries about interest rates and the dollar.

But Christine Callies, a technical analyst at Dean Witter Reynold., was not so optimistic.

“I don’t believe the rally is stable or reliable at these levels,” she said, noting that “the breadth statistics yesterday and today have been extremely stubborn.”

American Telephone and Telegraph led the Big Board’s most active-issues at 34, up .

New MCA Rumors

MCA jumped 3 3/8 to close at 61 7/8 on the NYSE, fueled by fresh market rumors of a potential sale or takeover of the entertainment giant. Coniston Partners declined to comment on a report that it might acquire as much as 5% of MCA and said it had not filed anything on MCA with the Securities and Exchange Commission.

Newmont Mining fell 2 points to 92 3/4, while G. Heilman Brewing slipped 1/8 to 40 1/2. Both have been involved in takeover activity.

Santa Fe Southern Pacific rose 1 7/8, to 58 7/8 after saying it planned to buy back 38% of its stock.

Among drug issues, Marion Laboratories rose 2, to 33, after saying it expects higher earnings. Upjohn rose 2 3/8 to 44 7/8, while Warner Lambert fell 3 3/8, to 78.

IBM lost 1 1/2, to 154, while National Semiconductor was up 3/8 at 18 7/8 and Pacific Telesis up 5/8 at 31.

In the meantime government bond prices pulled back Wednesday, reflecting some mild disappointment with the government’s latest report on inflation.

The Treasury’s 30-year bond finished off point, or $2.50 for every $1,000 in face value, while its yield rose to 9.54% from 9.51%.

Prices of corporate and municipal issues, however, moved higher.

The federal funds rate, the interest on overnight loans between banks, fell to 7% from 7.44% Tuesday.