The stock market kept climbing today, extending last week's rally amid hopes for lower interest rates.
The Dow Jones average of 30 industrials, up 22.89 points last week, rose 19.42 today to 2,694.97.
Advancing issues outnumbered declines by about 7 to 5 on the New York Stock Exchange, with 860 up, 596 down and 515 unchanged.
Big Board volume totaled 149.39 million shares, against 86.29 million in the previous session.
The NYSE's composite index gained .84 to 191.13.
The market began to rise last week on signs that the Federal Reserve was taking steps for the second time this month to relax its credit policy.
That development prompted Fed watchers to conclude that the central bank had decided to become more aggressive in its efforts to cushion the effect of a slowing economy.
The new trading week began amid talk of impending reductions in major banks' prime lending rates.
There was also conjecture that the Fed might make its intentions even clearer before long by cutting the discount rate, the charge it imposes on loans to private financial institutions.
That optimism faded a bit in today's activity, however, when Fed dealings in the credit markets suggested that it wasn't as eager to push rates lower as had been assumed over the weekend.
Bond prices fell in early trading today after a surprise reserve draining operation indicated that the Federal Reserve does not plan to ease credit policy.
The Treasury's benchmark 30-year bond was down 11/36, or $3.44 per $1,000 face amount, and its yield increased to 7.90% from 7.87% late Friday.
Economists said the Federal Reserve drained money from the banking system this morning, pushing up the key federal funds rate to 8 3/8% from 8 1/4% late Friday.
Many traders and other market players believed that the Fed last week had lowered its target rate for federal funds, the interest on overnight loans between banks, which is seen as a key sign on interest rate movements.
Earlier this month the Fed was thought to have lowered the federal funds rate to 8 3/8% from 8 1/2%. The Fed pumped reserves into the banking system last Wednesday, interpreted as a sign of further easing.
But draining funds from the market system puts pressure on interest rates. Higher interest rates in turn tend to lower bond prices.
"There was a definite signal that the funds rate had not been eased as some people had suspected," said Jean Buckley, a money market economist at BankAmerica Capital Markets in San Francisco. "That triggered a drop in bond prices."
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on outstanding Treasury issues with maturities of a year or longer, fell 3.03 to 1,194.84.