Wall Street, ascending from a dungeon of doubts, found its way into the summer sunshine Thursday, staging its best rally in more than a month.
Stocks managed a solid gain despite continuing evidence of worldwide pressure on interest rates.
The Dow Jones industrial average rose 28.63 points to 2082.33. Gaining issues led decliners by about 8 to 5 on the New York Stock Exchange.
A sharp fall in the Commodity Research Bureau index was another positive factor, traders said. The index, which measures a wide range of commodity prices and is watched as an inflation gauge, fell 3.33 to 2241.97. Traders also cited futures-related program selling.
It was the biggest rally since June 22, when the Dow jumped 43.03 points to 2152.20.
Interest rate worries roiled financial markets as West Germany`s central bank raised its Lombard lending rate to 5 percent from 1/2 percent in a bid to bolster the mark, which has lost ground to other major currencies in recent weeks.
There also were indications that Britain might move to raise rates again soon. And some analysts said an increase in U.S. rates can`t be far behind.
Taking luster off the stock market`s gain was a further downturn in the bond market.
”The bond market is still weak, reflecting the fact that Britain, West Germany and Japan have been raising interest rates for the last two months,” said Alfred Goldman, senior technical analyst for A.G. Edwards & Sons Inc. in St. Louis.
The stock market`s rally ”was not a big rise overall,” said Goldman.
”You could call this a knee-jerk rally in a market that was oversold because of the heavy decline of the last week.”
He said buyers lack conviction because ”everyone is responding to every bit of economic news.”
Big Board volume was a moderate 154.57 million shares, up from 135.89 million Wednesday.
Analysts said the Bundesbank`s decision to raise the Lombard rate, which is effective Friday, was aimed at supporting the mark, which has been falling against the U.S. dollar and British pound, and slowing the flow of capital out of West Germany.
But the mark continued to sink against the dollar, which rose against all major currencies after Federal Reserve Chairman Alan Greenspan said a lower dollar would not help boost U.S. exports.
In late trading in New York, the dollar was at 1.8662 marks, up from 1.8470 Wednesday. It was at 132.55 Japanese yen, up from 131.63.
The bellwether 30-year Treasury bond was yielding 9.26 percent, up from 9.24 percent Wednesday.
Dealers said increases in European interest rates seemed to help the dollar because traders believe they set the stage for higher U.S. rates.
The Lombard rate is the interest rate charged on banks` short-term borrowings from the central bank against securities as collateral.
The Bundesbank left its discount rate unchanged at 3 percent, which was set June 30 after a hike of a half percentage point.
On the NYSE, technology gainers included International Business Machines, up $2.62, to $123.75; Cray Research, up $2 at $80.25; and NCR, up $1.37, to $57.75.
Digital Equipment rose $3.62, to $105.87, after the company reported better-than-expected quarterly earnings.
Interco soared $8.37, to $67.75, after the company received a $64-a-share buyout offer from City Capital Associates.
McGraw-Hill was up $4.25 at $66 amid rumors that the British firm Pearson PLC might bid for the publisher.
