Stocks Post Sharp Gains but Volume Remains Thin

Optimistic investors bid stocks sharply higher in light trading Monday, buoyed by the strength of the economy and untroubled by a slight rise in oil prices. The Dow Jones industrial average rose more than 140 points.

Much of Wall Street’s good will was carried over from Friday, when a strong employment report boosted investor confidence. But some analysts, noting that the light volume from last week also continued into Monday, wondered how sustainable the rally was.

“The market seems to be going up because there aren’t any sellers around, not because there’s a lot of demand. That has a chance to end badly,” said Richard Dickson, senior market strategist at Lowry’s Research Reports. “Overseas markets are up strongly and oil’s down, and I think what we’re seeing is a little bit of a Pavlovian response to that more than anything else.”

Investors also were cheered by MGM Mirage’s proposed $4.85-billion acquisition of Mandalay Resort Group. With mergers and acquisitions gaining popularity, investors saw the trend as a sign of a stable, healthy economy.

The Dow gained 148.26 points, or 1.4%, to 10,391.08.

Broader stock indicators were sharply higher. The Standard & Poor’s 500 index was up 17.92 points, or 1.6%, at 1,140.42, and the Nasdaq composite index rose 42 points, or 2.1%, to 2,020.62.

The gains marked an important transition from May’s heavy sell-off. The Dow and Nasdaq had their best close since April 27, and the S&P; 500 last closed above 1,140 on April 23.

Treasury bond yields declined slightly in the absence of any fresh economic data as investors prepared to absorb $25 billion in new bonds this week.

The benchmark 10-year Treasury note fell to 4.76% from 4.77% on Friday. Trading was thin as dealers eagerly awaited an appearance by Federal Reserve Chairman Alan Greenspan today via satellite at a monetary conference in London.

Investors are anxious to see whether Greenspan reiterates the central bank’s recent line that inflation does not yet pose a real threat to the economy.

The merest hint of any worry about price increases could send the market into a tailspin, as it would cast doubt on the central bank’s ability to remain “measured” in its approach to tightening monetary policy.

The market must also get through auctions of five- and 10-year paper on Wednesday and Thursday respectively. The Treasury is set to sell $15 billion of five-year paper and $10 billion of reopened 10-year notes.

After remaining low for most of the day, benchmark light sweet crude oil settled at $38.66, up 17 cents a barrel on the New York Mercantile Exchange. The slight increase was largely ignored by investors who have worried about accelerating inflation in recent weeks. If oil prices can at least remain under $40 per barrel, analysts believe the market’s current upward trend may stabilize.

The start of trading on the New York Stock Exchange, Nasdaq and the American Stock Exchange was delayed two minutes in a tribute to former President Reagan, who died Saturday. Most U.S. financial markets will be closed Friday for a national day of mourning.

Among Monday’s market highlights:

* Boeing advanced $1.23, or 2.6%, to $48.13. The airplane manufacturer will benefit from a recovery in the commercial aerospace industry, said Lehman Bros. Inc. analyst Joseph F. Campbell Jr. He raised his rating to “overweight” from “equal weight” and said the share price could climb as high as $80 by 2008.

* General Motors rose 89 cents to $47.11 after it said it would spend up to $3 billion in China over the next three years, doubling its manufacturing capacity there.

* Mandalay surged $9.96 to $70.23, while MGM Mirage fell $1.19 to $44.84.

* McDonald’s was down 25 cents at $26.61 after it announced a 7.9% rise in same-store sales in May.

Advancing issues outnumbered decliners by more than 4 to 1 on the New York Stock Exchange.