STOCKS : Stocks Gain for Third Session; Dow Rises 10.73

Stocks gained for the third straight session Wednesday, encouraged by a growing sense on Wall Street that the economy will rebound later this year.

The Dow Jones industrial average, up 44.95 points Tuesday, rose another 10.73 points to 2,969.59. Advancing issues outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 920 issues rising, 627 declining and 503 unchanged.

Big Board volume rose to 188.45 million shares from Tuesday’s 162.35 million

Tuesday’s upsurge was attributed partly to hopes that a recovery from the recession was beginning to gather momentum.

Some of that optimism persisted Wednesday, as evidenced by strength in industrial stocks considered highly sensitive to the ups and downs of the business cycle.

In economic news, the Commerce Department reported that the gross national product declined at a 2.6% annual rate, after adjustment for inflation, in the first quarter of the year.

That slight revision from a previously estimated 2.8% decline was in line with most estimates, and it appeared to exert no strong influence on the market either way.

Among the market highlights:

* Industrial stocks continued to gain on hopes for a fast economic recovery. Among auto stocks, GM leaped 2 to 42 5/8, Ford rose 1 1/4 to 35 7/8 and Chrysler jumped 7/8 to 14 1/2, all in active trading.

* Among paper and forest-products stocks, International Paper rose 1 7/8 to 67 1/4, Georgia-Pacific 2 1/2 to 53 1/4, Louisiana-Pacific 7/8 to 40 3/8, Boise Cascade 3/8 to 25 7/8 and Weyerhaeuser 1/4 to 29 3/8.

* Rail issues also came in for buying. CSX added 1 to 45 and Union Pacific 2 3/8 to 85 3/4.

* Among other industrial issues, Emerson Electric gained 1 1/4 to 46 1/4, Eaton rose 1 1/8 to 56 3/8 and Nucor was up 2 to 76.

* Securities-industry issues were broadly higher as well, given the renewed strength in the overall stock market. Morgan Stanley rose 1 1/8 to 85 1/2, Merrill Lynch 1/2 to 40, Paine Webber 1/8 to 21 7/8, Bear Stearns 1/8 to 15 1/8 and Charles Schwab 1/2 to 22.

* Mortgage-finance stocks gained ground, evidently benefiting from improved figures reported Tuesday on existing-home sales. Federal Home Loan Mortgage climbed 2 5/8 to 86 7/8 and Federal National Mortgage 3/8 to 49 1/8.

* Gap Inc. jumped 2 1/4 to 64 7/8. Late Tuesday the retailer declared a 2-for-1 stock split and boosted its cash dividend.

* Standard Pacific soared 1 1/2 to 10 1/2. The California home builder benefited from a Kidder Peabody buy recommendation.

* Wyle Labs rose 1 to 15. The El Segundo-based electronics firm reported quarterly earnings of 34 cents a share, up from 30 cents.

* Jacobs Engineering jumped 1 3/8 to 20 5/8 the day after the stock split 2 for 1.

In foreign trading, shares closed higher in Japan and Britain but were mixed in Germany.

In London the Financial Times 100-share average ended 13.2 points higher at 2,492.9.

German share prices ended mixed in an active session as profit taking ahead of a holiday today eroded early gains. The DAX average finished at 1,681.53, down 0.61 points.

In Tokyo, the Nikkei 225-share average closed up 104.74 points at 25,495.41.

Mexican stocks hit another record, with the Bolsa index soaring 31.32 points, or 3%, to 1,085.11, on the strength of an advance in cement issues.

In Brazil, meanwhile, the Bovespa index rocketed 9.9% to a record 10,396. Volume, normally less than 5 billion cruzeiros, totaled 12.33 billion cruzeiros. Traders said the market is being fueled by an influx of foreign money.

On the New York Stock Exchange, the Brazil Fund jumped 7/8 to 14.

Credit

Bond prices were mixed in quiet trading.

The Treasury’s bellwether 30-year issue fell 1/16 point, or 63 cents per $1,000 in face amount. Its yield, which moves in the opposite direction from price, edged up to 8.29% from 8.28% late Tuesday.

Light trading was expected to continue in the absence of significant new data on the state of the economy.

As long-term bonds slipped, short-termers edged up despite recent Treasury Department sales involving tens of billions of dollars.

Mike Casey, an economist with Maria Ramirez Capital Consultants Inc., attributed the gain partly to Treasury purchases by money market managers seeking to comply with upcoming government rules that their portfolios include less-risky investments.

The federal funds rate, the interest on overnight loans between banks, was quoted at 5.50%, down from 6% late Tuesday.

Currency

The dollar closed higher in thin trading driven largely by technical factors.

Analysts said the market largely ignored the government’s revised estimate of the second-quarter gross national product.

Kevin Logan, chief economist with Swiss Bank Corp. in New York, said the dollar opened lower, continuing a downward trend. Technical factors then began to move it higher, and the light volume helped exaggerate the dollar’s movements.

Logan said many traders were out of the market, having closed their books for the end of the month.

In New York, the dollar bought 1.713 German marks, up from Tuesday’s 1.693. The greenback also rose against the Japanese yen--to 138.10 from 137.48 Tuesday.

The British pound slipped against the dollar in New York, falling to $1.7275 from $1.7490.

Other late dollar rates in New York, compared to Tuesday prices, included 1.1.4610 Swiss francs, up from 1.4440; 5.8145 French francs, up from 5.7540; 1,273.00 Italian lire, up from 1,260.00, and 1.14665 Canadian dollars, up from 1.14655.

Commodities

Grain and soybean futures prices fell on the Chicago Board of Trade, reflecting improved crop weather, slack export demand and lack of news about Soviet trade prospects.

On other commodity markets, cotton futures were mixed, oil futures fell precious metals retreated, cattle futures rose and pork futures were mixed.

Wheat futures settled unchanged to 3 cents lower in Chicago, with the contract for delivery in July at $2.8825 a bushel; corn was 3.25 cents lower to 0.50 cent higher, with July at $2.45 a bushel; oats were 4 to 4.25 cents lower, with July at $1.245 a bushel, and soybeans were 3 to 6 cents lower, with July at $5.74 a bushel.

Light sweet crude oil for delivery in July settled at $21.11 per barrel, down 22 cents, on the New York Mercantile Exchange.

Gold and silver futures fell modestly on profit taking from Tuesday’s strong gains.

Gold finished $2.50 to $2.90 lower, with June at $361.20 an ounce; silver was 0.9 cent to 1.2 cents lower, with May at $4.143 an ounce.

Market Roundup, D6