NEW YORK -- The Dow industrials surged 41.59 points yesterday, to 2772.28, the index's highest close since Aug. 3, the day following the Iraqi invasion of Kuwait.
Advancing issues led declining ones on the Big Board by a 4-1 ratio on heavy volume of 250 million shares.
"We'll see a continuing broad rally and large gains through the week," said Steve Berman, a banking-industry analyst at County NatWest.
He said Friday's dramatic credit easing by the Federal Reserve -- which cut the discount rate for the second time in less than two months -- should help create loan demand as rates on loans to businesses and consumers come down further. Many consumer loans are tied to the prime rate, which continued to be cut by banks across the country yesterday, he noted.
Maryland's largest banking companies lowered their rates yesterday. The Bank of Baltimore, Citizens Bank of Maryland, Sovran Bank/Maryland and Mercantile-Safe Deposit and Trust Co. reported they had lowered their prime rates, and Maryland National Bank said it would lower its prime to 9 percent today.
Signet Bank/Maryland and NCNB National Bank of Maryland lowered their prime rates Friday.
Strategists agreed that the market appears to have decided the battered banks and the more versatile, smaller-capitalized companies will benefit most quickly from the Fed's decision to fight the recession and the national "credit crunch" with aggressive monetary easing.
"What this suggests is that 'smart money' is positive on this market," Donald Selkin, an analyst at Prudential-Bache Securities, said. "People are anticipating that if the second half of 1991 holds an economic rebound, the smaller companies are going to benefit fastest, and they're going to receive the initial impact of a new bull market in stocks."
Among industry groups, the long-battered bank stocks were stellar performers, providing a key incentive for bidding in other interest-sensitive issues, as well as more economy-sensitive ones.
Friday's move by the Federal Reserve to ease U.S. monetary policy inspired considerable institutional value-hunting among the banks, block traders said.
Among the money-center banks, volatile Wells Fargo soared 6 3/8 , to 69 3/8 ; Security Pacific 2 7/8 , to 25; J. P. Morgan 2 5/8 , to 48 1/2 ; Bankers Trust 2 5/8 , to 45; BankAmerica 2 1/4 , to 32 1/8 ; and Mellon 2, to 25 1/2 .
Every other money-center bank gained at least a point.
Citicorp, Chase Manhattan, and BankAmerica reached the New York Stock Exchange's list of 10 most active stocks.
Major foreign stock markets moved only marginally overnight.
[The dollar, undermined by a weak economy and lower U.S. interest rates, plunged to an all-time low against the German mark yesterday, prompting central banks from nine countries to intervene and boost the currency from its lows, Reuters reported.
[The dollar fell through its previous traded low of 1.4630 marks, reached Dec. 10, to hit 1.4555 marks before European and North American central banks intervened in the market and bought dollars.
[In nervous European trading, investors sold dollars early in reaction to the increased disparity between German and U.S. interest rates.]