Dow Extends Its Rally, Surges 16.34 to 2,770.9

The stock market climbed to record highs for the second straight session today, following through on Tuesday’s sharp gain.

The Dow Jones average of 30 industrials climbed 16.34 to 2,770.90, stretching its gain since the start of the week to 78.08 points.

Advancing issues outnumbered declines by about 5 to 4 on the New York Stock Exchange, with 812 up, 652 down and 507 unchanged.

Big Board volume totaled 194.59 million shares, up from 182.55 million in the previous session.

The NYSE’s composite index rose 1.14 to 197.98.

Analysts noted some “catch-up” buying by investors who were caught off guard by the market’s revived rally this week.

The new advance in stock prices was attributed in large measure to persistent strength in the dollar and declining interest rates.

Talk began stirring in the financial world early this week that the Federal Reserve might soon find room to further relax its credit policy, prompted by slow-to-moderate economic growth and favorable inflation news.

Interest rates levelled off in the credit markets today. But after hesitating for the first two hours of the session, stocks began forging ahead again.

Bond prices inched lower in early dealings today in the wake of three consecutive advances.

The Treasury’s benchmark 30-year bond was off 3/32 point, or nearly $1 for every $1,000 in face amount, at midday. Its yield edged up to 8.17% from 8.16% late Tuesday.

Martin Morrow, a money market economist for Merrill Lynch Capital Markets, said traders were awaiting Friday’s planned release of employment figures from September for an indication of the economy’s strength.

He said traders were also looking toward the West German central bank to see if it raises a key lending rate later this week in an effort to reinforce its efforts to curb the dollar’s rise.

Bond prices have benefited in recent days from a rise in the dollar, making U.S. Treasury notes and bonds more attractive to foreign investors.

In the secondary market for Treasury bonds, prices of short-term governments slipped 1/16 point, intermediate maturities were off 1/8 point and long-term issues were down by between 1/32 point and 3/32 point, the Telerate Inc. financial information service said.

The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on outstanding Treasury issues with maturities of a year or longer, lost 0.88 to 1,173.89.

Moody’s investment grade corporate bond index, which measures total return on a portfolio of 80 corporate bonds with maturities of five years or longer, was up 0.52 to 330.30.

Yields on three-month Treasury bills rose to 8.04% as the discount gained 3 basis points to 7.78%. Yields on six-month bills rose to 8.30% as the discount advanced 4 basis points to 7.87%. Yields on one-year bills rose to 8.39% as the discount rose 3 basis points to 7.80%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, paid at maturity.

The federal funds rate, the interest on overnight loans between banks, was quoted at 9 1/16%, up from 9% late Tuesday.