Highlights of Wednesday's market activity, compiled from Times staff and wire reports:
* Wall Street stocks lunged into the third quarter with sturdy gains as a flood of new money and continued hope for an interest rate cut boosted blue chips more than 1%. The Dow Jones average closed up a 35.58 points to 3,354.10.
* The talk of possible new credit easing also pushed Treasury bond prices higher. The yield on the Treasury's main 30-year bond, which moves inversely to its price, fell to 7.74% from 7.78% late Tuesday.
* Oil prices rebounded partially from Tuesday's big drop as traders learned that the U.S. supply of crude oil had fallen sharply last week.
As the Fed's policy setting Federal Open Market Committee met this week, analysts have been busy debating the chances for new moves to ease credit conditions.
Many observers believe that the decision stands to be influenced heavily by the latest data on the employment situation, scheduled to be made public by the Labor Department this morning.
If the figures point to continued sluggishness in the economic recovery, the central bank will presumably have a new incentive to nudge short-term interest rates lower.
A weak report from the nation's purchasing managers also reinforced hopes that the Federal Reserve will soon cut interest rates.
In the broader market, advancing issues outnumbered declines by more than 2 to 1 on the New York Stock Exchange, on Big Board volume of 214.25 million shares, against 200.98 million in the previous session.
Among the market highlights:
* Gainers among the blue chips included Philip Morris, up 2 1/2 to 76; Merck, up 7/8 to 49 5/8; International Business Machines, up 3/8 to 98 1/4; Boeing, up 1 1/4 to 41 1/8, and American Telephone & Telegraph, up 3/4 to 43 3/4.
* IBM was one of the stocks chosen by Shearson Lehman Bros. for the annual "10 uncommon values in common stocks" list it publishes at midyear.
* Among some of the others, BankAmerica rose 3/8 to 44 3/4; Chemical Banking 3/4 to 37 7/8; AutoZone 1 3/8 to 29 3/8; Forest Laboratories 1 to 33, and Royal Dutch Petroleum 1 to 88 5/8.
* Bradlees ranked among the volume leaders, trading at 12 1/2 after an initial public offering of 11 million shares of the stock by Stop & Shop Cos. at 13.
* Quarterdeck Office Systems plunged 6 3/4 to 5 5/8 as the most active issue in NASDAQ trading. The computer software company estimated a sharp drop in earnings for the fiscal quarter that ended Tuesday.
* Among other leading NASDAQ market technology stocks, Novell gained 2 to 55 1/4; Intel 1 to 58; Microsoft 2 1/8 to 72 1/8, and Oracle Systems 2 1/8 to 17 3/8. Late Tuesday Oracle reported sharply higher quarterly profits.
In Tokyo, slightly easier short-term money rates and renewed hopes of a discount rate cut boosted the 225-share Nikkei average 373.34 points to 16,325.07.
London's Financial Times 100-share average finished at 2,493.9, down 27.3 points.
In Frankfurt, the 30-share DAX average rose 3.63 points to 1,756.26.
The price of the Treasury's main 30-year bond rose 3/8 point, or $3.75 per $1,000 in face amount.
The expectation of lower interest rates pushed up bond prices as traders bought securities to guard against a sharp run-up after the unemployment data is released.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.975%, down from 4.25% late Tuesday.
The dollar finished mostly higher in foreign exchange, erasing an earlier fall as traders bought the currency to cover short positions.
The dollar fell in overseas trading, and after domestic markets opened, it was depressed further by the purchasing managers report.
Sluggish economic activity usually hurts the dollar's value against other currencies.
But the dollar recovered in the afternoon as traders covered short positions, or bets that the dollar's value would decline.
The dollar closed in New York at, 1.523 German marks and 125.40 Japanese yen, compared to Tuesday's 1.522 marks and 125.60 yen, respectively.
Light, sweet crude oil for delivery in August settled at $21.86 per barrel, up 26 cents, at the New York Mercantile Exchange.
On other commodity markets, hog prices plunged; deferred pork-belly futures also dropped; platinum resumed its strong advance, pulling other precious metals higher, and grains and soybeans were mixed.
On New York's Commodity Exchange, August gold rose $1.20 to $345.60 an ounce, and July silver rose 0.1 cent to $4.029 an ounce.