Dow Dazzles, Dips but Ends Day Ahead 11.95

NEW YORK —  Stocks rallied today, extending their gains to a sixth consecutive close, as news of a fresh blockbuster takeover bid lured buyers back into the market.

The Dow Jones industrial average finished up 11.95 points at 2,514.61, in active trading of 171.59 million shares on the New York Stock Exchange.

Tobacco issues led the advance, buoyed by a $21.2-billion bid for Britain’s BAT Industries PLC by raider Sir James Goldsmith and two of his associates.

Stock prices closed well below their highs for the day, however, as the market’s advance spurred many investors to take profits.

The Dow index previously touched a session high of 2,531.11, but retreated on profit-taking and futures-related selling.

The Dow index has advanced about 70 points since the start of last week on investor hopes that declining interest rates will keep the economy from sliding into a recession.

Bonds rose in value in quiet early trading today, with yields of some government securities dipping below 8% for the first time since the spring of 1987.

“There’s an overwhelming bullish sentiment in the market right now and that’s not going to go away any time soon,” said Kathleen Camilli, a money market economist for Drexel Burnham Lambert Inc.

“Everyone expects the economic data for the rest of the month to indicate the economy is softening.”

A weak economy is considered good news for the bond market because it improves the likelihood that the Federal Reserve will loosen credit policies by lowering short-term interest rates to prevent the economy from heading into a recession.

In the secondary market for U.S. Treasury bonds, the closely watched 30-year security was up around 1/8 point, or $1.25 per $1,000 face amount, by midday.

Its yield, which moves inversely to its price, stood at 8%, unchanged from Monday’s close. However, earlier in today’s trading session it had briefly dipped to 7.97%--the lowest level since April 8, 1987.

Sizable Gain Monday

The 30-year bond had risen around $2.50 in price on Monday, after Chase Manhattan Bank lowered its prime lending rate a half percentage point to 10.5%.

Prices of short-term government issues were unchanged to 1/16 point higher at midday, while intermediate maturities rose 1/16 point to 1/4 point, and long-term issues ranged from 1/32 point to 1/8 point higher, according to Telerate Inc., a financial information service.