U.S. stocks rallied strongly Monday for a second consecutive session, buoyed by hopes that economic growth is moderating and interest rates will stabilize.
Meanwhile, most Latin American stock markets eased in profit taking after last week's stunning rebound.
On Wall Street, the Dow industrial average jumped 23.88 points to 3,932.34, atop Friday's 49-point gain. The blue-chip index is now at its highest level since Oct. 19 and just 46 points below its all-time high set a year ago.
In the broad market, winners topped losers by almost 2 to 1 on the New York Stock Exchange in active trading. Industrial, transportation, financial and utility stocks led the rally.
Stocks had surged Friday after the government reported surprising weakness in retail sales in December, spurring new predictions of slower economic growth this quarter.
If true, that should allow the Federal Reserve Board to hold short-term interest rates steady when the central bank meets Jan. 31, economists say.
In the bond market Friday, yields tumbled across the board as traders reacted to the possibility of a more accommodating Fed. Shorter-term yields had jumped in recent weeks on the assumption that the Fed would raise rates at least 0.50 point at the meeting this month.
On Monday, the bond market was closed for Martin Luther King Jr. Day, but stocks continued to reflect the new optimism about rates.
Two major brokerages turned more positive on stocks Monday: Oppenheimer & Co. suggested that investors shift their portfolio mix from 20% stocks, 40% cash and 40% bonds to 40% stocks, 40% bonds and 20% cash.
Also, DLJ Securities suggested boosting stocks to 50% from 45%, cutting cash from 20% to 15% and leaving bonds at 35%.
Michael Metz, Oppenheimer's chief investment strategist, said a more favorable interest rate environment led him to revise his attitude toward stocks. He predicted that the Dow will reach 4,100 sometime early this year before steadying at that higher plateau.
"We're headed for a very, very slow economy which means the Fed will be going neutral," he said. "This takes the restraining lid off the stock market for the time being."
Other analysts warned, however, that many investors remain dubious that the economy is truly slowing. And others may begin to worry about too deep a slowdown, which could crimp corporate earnings.
But in the near term, earnings should help stocks: Fourth-quarter results are expected to be strong for many industries.
Among Monday's highlights:
* Industrial issues leading the market up included Deere, up 4 1/4 to 74 1/2; 3M, up 1 1/4 to 53 1/4; Scott Paper, up 1 7/8 to 73 3/8; Cooper Tire, up 1 5/8 to 27 3/4, and Dow Chemical, up 1 3/8 to 69 1/4.
* Financial stocks were also strong. Citicorp gained 7/8 to 41 1/2, American International Group shot up 3 to 105 1/4, Morgan Stanley jumped 2 3/8 to 64 1/2 and First Interstate, which reported better-than-expected earnings, rose 2 1/8 to 73 5/8.
Also, Charles Schwab jumped 1 7/8 to 39 1/4 after an investment tip sheet said Goldman, Sachs & Co. might try to acquire the company for $48 a share.
* Among transport issues, Delta Air Lines gained 2 to 55 1/2, Conrail rose 1 5/8 to 56 and Burlington Northern was up 1 5/8 to 53.
* In the utility sector, American Electric Power rose 5/8 to 34 3/8, Peco Energy added 5/8 to 25 1/4 and Detroit Edison gained 1/2 to 27 3/8.
* Tech issues were also strong. Progress Software surged 6 1/4 to 47 after posting strong earnings. Other gainers included IBM, up 1 1/8 to 77 1/2, and Hewlett-Packard, up 1 3/8 to 105 1/4.
* On the downside, Quaker Oats tumbled 2 7/8 to 33 1/4 as takeover rumors were dashed.
In Latin American markets, Mexico City's Bolsa index added 26.49 points to 2,243.01, but Brazil's key stock index eased 1.1% and Argentina's was off 1.3%.
In Tokyo the market was closed for a public holiday.
In Frankfurt, the DAX 30-share average rose 30.02 points to close at 2,085.64, while London's FTSE-100 index gained 28.4 points to 3,076.7.
In Hong Kong, the Hang Seng index rebounded 251.90 points to 7,504.24.
Elsewhere, natural gas futures prices rocketed higher, halting a nine-day slide amid forecasts for colder, more seasonal weather in the Northern United States.
On the New York Merc, wholesale natural gas for February delivery soared 6.7 cents, or about 5%, to $1.39 per 1,000 cubic feet.
In currency markets, the dollar was quoted in New York at 98.52 Japanese yen, up from 98.50 yen Friday. It also changed hands at 1.532 German marks, down from 1.534.