The stock market racked up another solid gain Monday, despite a surge in short-term interest rates amid new signs that the Federal Reserve may not loosen up on credit to get the economy moving.
The Dow Jones index of 30 industrials, up 22.89 points last week, rose another 19.42 to 2,694.97.
Big Board volume came to 149.39 million shares, against 86.29 million Friday.
Advancing issues outnumbered declines by about 7 to 5 in nationwide trading of New York Stock Exchange-listed stocks, with 883 up, 612 down and 489 unchanged.
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 impact 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 clearer before long by cutting the discount rate, the charge that it imposes on loans to private financial institutions.
That optimism faded a bit in Monday's activity, as the Federal Reserve drained cash from the banking system in its open market operations early in the day, dashing hopes for an immediate credit easing and a cut in banks' prime lending rates.
Chevron climbed 3 1/4 to 68 1/4 in active trading. The company said it would create a leveraged employee stock ownership plan financed with borrowings of about $1 billion.
General Electric gained 1 1/4 to 61 3/8. GE said it was a buyer of its shares as part of a recently announced $10-billion repurchase program slated for the next five years.
Among other actively traded blue chips, Exxon rose 1 to 46 7/8; Bristol-Myers Squibb added 1/8 to 56 1/2; Philip Morris was unchanged at 41 1/2; American Telephone & Telegraph lost 5/8 to 43 1/8, and International Business Machines was down 1 at 99 3/8.
In Tokyo, the benchmark 225-share Nikkei index soared to a record close Monday for the fourth-straight session. It finished up 397.06 points, or 1.1%, at 36,881.53.
Share prices on London's stock exchange were slightly higher. The Financial Times 100-share index closed up 1.9 points at 2,224.3.
Bond Prices Fall as Fed Funds Rate Rises Government bond prices dropped and short-term interest rates jumped Monday after the Fed drained reserves from the banking system, confounding traders who had guessed that the central bank had decided to relax its credit policy.
The Treasury's benchmark 30-year bond fell 13/32 point, or $4 per $1,000 face amount, while its yield climbed to 7.90% from 7.87% late Friday.
Yields on some short-term Treasury bills were up more sharply, soaring by as much as two-tenths of a percentage point.
Economists said the Federal Reserve drained money from the banking system about an hour earlier than its normal intervention time Monday morning, driving the key federal funds rate up to 8.50% by the end of the day from 8.25% late Friday.
Interest Rate Fears Pull Dollar Down The dollar fell sharply against most major foreign currencies Monday as traders anticipated a further decline in interest rates in the United States.
"The psychology is definitely bearish for the dollar and bullish for the (West German) mark," said Earl Johnson, a vice president for foreign exchange at Harris Trust & Co. in Chicago.
Traders expected interest rates to fall in this country in response to a slowing economy, and to rise in West Germany because of the continuing political changes in Eastern Europe, Johnson said.
The dollar's downward trend is expected to remain in place in the next few weeks unless the Bush Administration issues new statistics indicating strength in the economy, Johnson said.
In Tokyo, the dollar fell to a closing 143.35 Japanese yen from 143.80 yen at Friday's close. Later, in London, it rose to 143.40 yen, but in New York, it fell to 143.195 yen from late Friday's 143.60.
The dollar gained against the British pound, as sterling fell to $1.5605 from $1.5635 late Friday in London, and to $1.5585 from $1.5625 late Friday in New York.
Energy Futures Dip as OPEC Talks Stall U.S. energy futures closed lower after OPEC ministers ended the fifth day of talks without setting a ceiling on total oil output or allocating quotas for the first half of 1990.
January crude oil fell 19 cents to $19.63 a barrel. December unleaded gasoline fell 0.74 cent to 50.89 cents a gallon and December heating oil fell 0.49 cent to 60.92 cents a gallon.
On other commodity markets, cotton futures plunged the permitted daily limit; soybeans were down sharply; and livestock and meat futures were mixed.
Most cotton futures prices fell the daily limit of 2 cents a pound on the New York Cotton Exchange in a selloff inspired almost entirely by technical sell signals in the absence of fresh supply-and-demand news.
Cotton settled 1.75 to 2.33 cents lower, with March at 71.08 cents a pound; and the December contract, which has no limit pending expiration, was down 2.33 cents at 67.72 cents a pound.