NEW YORK — Optimism that interest rates might drop further boosted the stock market Monday as Wall Street pumped more life into last week's advance.
The Dow Jones average of 30 industrials rose 28.54 to 1,811.16, the biggest gain since a 36.06-point rise on June 13. The gain followed an 18.98-point rise for all of last week.
Shaking the months-long string of "Blue Monday" sessions that have begun recent weeks with selloffs or lackluster performances, stocks responded strongly to a rally in the bond market, where prices of some long-term Treasury issues rose as much as $10 for each $1,000 in face value.
Bonds began rallying last week following completion of the three-day, $28-billion Treasury refunding.
Bond Rally Continues
The bond rally continued Monday in anticipation that retail sales and industrial production statistics due out later in the week would show that the U.S. economy remained in the doldrums and that the Federal Reserve Board would push interest rates lower to spark it.
Long-term bond issues posted the sharpest increases Monday.
The bellwether 30-year bond rose 7/8 point to yield 7.35%, down from 7.42% late Friday. The price of a 20-year bond also increased 7/8 point. The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
"The market is starting to set up for these forecasts," explained Jay Goldinger, a bond dealer with the Beverly Hills investment banking firm Cantor, Fitzgerald & Co. "The market is getting a little carried away here," he added.
Economic data due this week on retail sales, industrial production and producer prices are expected to indicate continuing weakness accompanied by mild inflation.
"There seems to be an awareness the economy is sluggish and the Fed might try to push interest rates down another notch," said Raymond DeVoe of Legg Mason Wood Walker in New York.
Hildegarde Zagorski, an analyst for Prudential-Bache Securities, said stocks also continued to benefit somewhat from a strengthening of oil prices following last week's agreement by the Organization of Petroleum Exporting Countries to cut output.
While cheap energy is a plus for the U.S. economy as a whole, the steep fall in oil prices since late last year had battered energy companies and banks with big energy and real estate loan portfolios.
Oil Issues Advance
In the stock market, Amoco rose to 62, Exxon 3/8 to 63, Occidental 5/8 to 26 1/8 and Chevron 1/2 to 40 3/8.
Among interest rate sensitive issues, Chase Manhattan rose 1 3/4 to 40 5/8, Citicorp 1 3/8 to 54 3/8, First Boston 2 to 50, Paine Webber 2 1/8 to 36 1/2 and Morgan Stanley 2 3/4 to 69 5/8.
Precious metals issues rose as platinum and gold prices soared on fears that South Africa might halt metals exports if slapped with economic sanctions. ASA was up 1 to 35 1/2, Hecla 1 5/8 to 11 7/8 and Homestake 1 to 25.
Goodyear was the most active NYSE issue, rising 5/8 to 31 7/8 as 3.35 million shares changed hands, including two 1.48-million-share blocks.
Hammermill rose 5 to 64 in heavy trading. The company said it reached a definitive agreement for International Paper to purchase all of its outstanding common shares for $64.50 each. International fell 7/8 to 64.
NL Industries common stock, adjusted for the spinoff of its chemicals business, rose 7/8 to 4 1/2 in heavy trading. Investor Harold C. Simmons said Friday that he had raised his stake in the company to 51.1%. Stock of the NL chemicals business fell 1/2 to 11.
Whittaker surged 6 1/8 to 33 3/8 in heavy trading. The Los Angeles-based conglomerate on Friday announced plans to buy back nearly half of its shares, sell many of the company's operation and focus the firm on defense electronics, aviation components and chemicals.
Blue Chips Gain
Among blue chips, IBM was up 1 to 131, AT&T 1/8 to 24, Alcoa 1 3/4 to 36, Eastman Kodak 1 5/8 to 56 1/2, General Electric 2 3/8 to 75 5/8, General Motors 1 1/2 to 71 3/4 and McDonald's 2 3/8 to 65.
Big Board volume totaled 125.60 million shares, against 106.30 million on Friday.
Standard & Poor's index of 400 industrials rose 4.43 to 266.10, and S&P's 500-stock composite index was up 3.80 to 240.68.
In the secondary market for Treasury bonds, prices of short-term governments rose 3/32 point and intermediate maturities rose 5/16.
In corporate trading, industrials and utilities each rose 5/8 point in moderate trading. Among tax-exempt municipal bonds, general obligations fell point and revenue bonds were up point.
Yields on three-month Treasury bills were down 4 basis points to 5.66%. Six-month bills fell 6 basis points to 5.69%.
The federal funds rate traded at 6.3125%, up from 6.25% on Friday.