Dow Rises 25.49 in Late Stock Rally : Bank, Airline Issues Manage Strong Gains; Volume Light

NEW YORK — Stock prices climbed to a two-month high in quiet trading Monday, adding to last week’s gains despite some weakness in the bond market.

The Dow Jones index of 30 industrials, down more than 10 points in the early going, was up 25.49 at 2,351.64 by the end of the day. That marked its highest close since it stood at 2,372.16 on April 8.

Volume on the New York Stock Exchange came to 136.37 million shares, against 129.11 million Friday.

Prices of long-term government bonds, which move in the opposite direction from interest rates, took a tumble in early trading, helping to depress stock prices briefly.

But as the session progressed, bonds recovered part of their early losses and the stock market quickly resumed last week’s advance.

Analysts have been concerned lately over the low level of trading volume, which has suggested an absence of widespread enthusiasm even when prices are rising.

Money-center banks were a notable strong spot in the market, with Citicorp up 1 1/2 at 59 3/4, Chase Manhattan up 7/8 at 40, Manufacturers Hanover up 3/4 at 43 3/4, Chemical New York up 1 at 45 and J. P. Morgan 2 1/8 higher at 47 5/8.

Airline Stocks Jump

Airline issues were broadly higher, aided by news of fare increases. NWA added 2 3/4 to 70 1/8, Delta Air Lines rose 1 to 56, AMR gained 7/8 to 58 1/8 and Trans World Airlines added 1 5/8 to 29 1/8. After the close, TWA reported a 38.4% increase in passenger traffic for May.

The strength in those stocks helped the Dow Jones index of 20 transportation stocks break 1,000 to a new high, rising 14.76 points, or 1.5%, to 1,001.42.

Among the blue-chip industrials, International Business Machines gained 1 to 161, General Electric rose 1 3/8 to 54, Merck was up 2 at 162 3/4, Philip Morris gained 1 3/4 to 89 and McDonald’s added 1 3/8 to 83 1/2.

Advancing issues outnumbered declines by about two to one on the NYSE. The exchange’s composite index was up 1.64 at 167.13.

In the bond market prices skidded lower in response to a weaker dollar and lowered expectations for the economic summit meeting under way in Venice, Italy.

But the Treasury’s key 30-year bond still finished down about 1/2 point, or about $5 for every $1,000 in face value. Its yield, which moves inversely to the bond’s price, moved up to 8.69% from 8.64% on Friday.

“The expectations (for the summit) are very low,” said William Gross, head of fixed-income investing for Pacific Investment Management in Newport Beach.

David Jones, economist for Aubrey G. Lanston & Co. in New York, said the market was buoyed somewhat by President Reagan’s announcement in Venice that U.S. trade sanctions against the Japanese would be trimmed as a reward for their improved compliance with agreements on computer chip pricing.

“The markets wanted concrete action to stabilize the dollar,” Jones said. “

Municipals Dip

In other markets, corporate and municipal issues were mostly lower. Yields on Treasury bills offered in the secondary market were off slightly.

In the secondary market for Treasury bonds, prices of short-term governments were down 5/32 point, intermediate maturities were 3/32 point to point lower and 20-year issues declined 3/8 point. In corporate trading, industrials fell 1/8 point and utilities were off point in light trading, according to the investment firm Salomon Bros.

Among tax-exempt municipal bonds, general obligations were down point and revenue bonds were down between and 3/8 point, Salomon Bros. said. Trading was light.

Yields on three-month Treasury bills were off 2 basis points to 5.65%. Six-month bills fell 4 basis points to 5.96% and one-year bills were down 1 basis point at 6.45%. The federal funds rate, the interest on overnight loans between banks, traded at 6.675%, down from 6.688% on Friday.