Bulls Are Stampeding Again

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Hopes for lower interest rates send the stock market on another rampage

Even after a red-hot, record-setting summer on Wall Street, last week's performance on the New York Stock Exchange was still stunning. Following the 125-point increase from 777 during the last half of August, the Dow Jones index of 30 leading industrial stocks had hovered at the low 900s. But then came rumors last week that the Federal Reserve Board had voted to ease up on its tight-money policy. True or not, the stories were enough to send the market into a new runaway rally. The Dow exploded for a 79.11-point weekly gain, closing at 986.85, the highest level in 15 months.

Trading volume was staggering. Some 488 million shares changed hands, the second highest level in history. On Thursday, trading reached 147.1 million shares, surpassing the daily record of 137.3 million shares set only seven weeks ago.

The latest market rally started on Wednesday, when the Dow index rose 37 points, the second highest daily gain ever. On Thursday morning, the most casual ticker-watcher knew that something extraordinary was happening when volume on the Big Board exceeded 43 million shares in the first hour. That would normally be considered moderately heavy business for an entire day. By 1 p.m., three hours after trading began, volume had reached 96 million shares, straining even the exchange's new computerized tape system.

At the 4 p.m. close of business, exhausted traders went wild. They blew whistles, tossed sheets of paper into the air, slapped each other on the back and behaved like teen-agers cheering for their high school football team. The industrial index was up almost 21 points for the day. Friday's volume was nearly as heavy, 123 million shares, and the Dow Jones index rose an additional 20.88 points.

It was a broad-based rally led by the blue chips: the biggest gainers were large established corporations. American Telephone & Telegraph, the most widely held stock in America, gained nearly 4 points during the week. Other major winners were IBM, Eastman Kodak and General Electric. General Motors saw its stock rise 3½ points to 50¾, a yearly high. Bank stocks also increased, including those of Chase Manhattan, Citicorp, Bankers Trust and J.P. Morgan. Even Johnson & Johnson managed to get some relief from its Tylenol headache. At week's end it closed at 42⅝ and had recovered about a third of what it had lost after the scare began.

The surge was led by institutional investors, as banks, pension funds and insurance companies gobbled up 10,000-share blocks of stock last week at a breathless pace. There were also signs that smaller investors were jumping back into stocks after forsaking them for years in favor of high-yielding money-market funds and other interest-bearing instruments. Said Kenneth Holland, an executive vice president of New York's Chemical Bank: ''A lot of individuals have joined us in the second leg of a bull market that started in mid-August."