Stocks, Bonds Extend Rally; Dow Gains 5.48

NEW YORK —  The stock market chalked up its third straight gain Wednesday, extending the rally that it began at the start of the week with help from declining long-term interest rates.

The Dow Jones average of 30 industrials rose 5.48 to 1,803.29, closing above 1,800 for the first time since it stood at 1,879.50 two weeks before.

Volume on the New York Stock Exchange came to 134.57 million shares, up from 132.57 million on Tuesday.

Analysts said traders were encouraged by the market’s recovery on Monday and Tuesday, during which the Dow Jones industrial average gained 35.16 points after the record-breaking selloff that it suffered earlier this month.

Many market forecasters question the durability of the rebound. But traders nevertheless continued bidding for stocks whose prices were beaten down in the general drop two weeks ago.

In the credit markets, bond prices posted strong gains, driven higher by conflicting expectations on the direction of interest rates.

Caterpillar Inc. fell 5 1/8 to 40 5/8 in active trading. Late Tuesday, the company lowered its financial projections for 1986 and said it now expects to post a loss for the third quarter.

J.P. Stevens Stock Buyback

J. P. Stevens climbed 2 1/2 to 35 7/8. The company has announced plans to offer between $34 and $38 apiece for as many as 25 million of its shares.

Trans World Airlines rose 1/2 to 2 3/4, posting a new 52-week high along with 28 other NYSE issues. Carl C. Icahn, the company’s chairman, said TWA will show substantial profits in both the third and fourth quarters.

Bank stocks were strong, helped by the improvement in interest-rate expectations. J. P. Morgan gained 2 to 85, Manufacturers Hanover 1 to 45 5/8, Citicorp 3/4 to 51, Chemical New York 3/8 to 45 3/8 and Chase Manhattan 3/8 to 37 7/8.

Among the blue-chip industrial issues, General Electric rose 1 1/2 to 73 1/2, RJR Nabisco 1 1/2 to 48 1/2 and Minnesota Mining & Manufacturing 1/2 to 103 3/8.

But technology issues were weak, apparently hurt by rumors--denied at mid-afternoon--that a prominent research firm had lowered its forecasts for profits in the industry.

International Business Machines lost 1 3/4 to 137 1/2, Digital Equipment 2 1/2 to 93 1/8 and Texas Instruments 1 1/2 to 113 1/2.

Advances Outnumber Declines

In the daily tally on the Big Board, advancing issues outnumbered declines by nearly three to two.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,812, compared to 2,437 on Tuesday.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 161.67 million shares.

Standard & Poor’s index of 400 industrials rose 0.48 to 261.35, and S&P;’s 500-stock composite index was up 0.61 at 236.28.

In the secondary bond market, the Treasury’s key 30-year bond rose 1 point, or $10 for each $1,000 in face value, and its yield moved down to 7.63% from 7.72% late Tuesday. Most other issues were also higher.

In the secondary market for Treasury bonds, prices of short-term governments rose 13/32 point, intermediate maturities rose 11/32 point and long-term issues were up 16/32 point, according to Salomon Bros.

Among tax-exempt municipal bonds, general obligations rose 1/2 point and revenue bonds were up 3/8 point. Trading was moderate.

Yields on three-month Treasury bills were up 1 basis point to 5.23%. A basis point is one-hundredth of a percentage point. Six-month bills fell 2 basis points to 5.34%, and one-year bills were off 2 basis points at 5.44%.