Shares of J.P. Morgan & Co. advanced Monday while the rest of the stock market paused after the rapid advances of last week.

Morgan's move-up $1 to $115.5625 may have been related to merger speculation in Europe.

"There was a fair amount of merger speculation around Europe today. That may have been a factor driving the stock, but I don't think there's anything to it," said Raphael Soifer of Brown Brothers, Harriman & Co., New York.

"It's a thin reed," agreed analyst Ronald I. Mandle of Sanford C. Bernstein & Co., New York.

Morgan has been mentioned periodically as a possible partner for the major Swiss banks, Germany's Dresdner Bank, and others.

The largest deal unveiled in the global financial sector Monday was the $9 billion agreement by CIT Group, a commercial and consumer finance concern, to buy Canada's Newcourt Credit Group.

As a component stock of the Dow Jones industrial average, Morgan may also have belatedly benefited from renewed investor interest in blue chips as the Dow average finally approaches the much-discussed 10,000 mark

On Friday, the Dow hit its first record high in nearly two months, soaring 268 points for the day to finish the week at 9,736. On Monday, the average eased slightly to 9727.6

Bank stocks also took a break from the explosive action of last week. Both the Standard & Poor's bank index and the index of Nasdaq-traded banks slipped 0.6%.

Citigroup, was up 43.75 cents to $62.1875 while Chase Manhattan Corp. was off $1.625 to $85.8125. Among superregionals, First Union Corp. was down 37.5 cents to $53.1875 while Bank One Corp. was up 18.75 cents to $55.1875.

Analysts said the breather was not surprising after last week's advances. The gains came on investors' renewed confidence that the Federal Reserve will not hike interest rates despite strong economic growth, because inflation still appears dormant.

But Monday, one Fed official said bond investors havebeen right to assume that the central bank's next move probably will be to raise rates.

"The market's judgment is probably right." William Poole, president of the Federal Reserve Bank of St. Louis, said in a Washington. Mr. Poole, considered a hawk on inflation, is not a voting member of the Fed's policymaking Open Market Committee this year.

Meanwhile, most economists still expect economic growth to slow this year, whether the Fed acts or not. But that should not prevent double-digit earnings growth by top companies in the banking industry, according to analyst Susan L. Roth of Donaldson, Lufkin & Jenrette Securities Corp.

Ms. Roth said improving consumer fundamentals-the average debt burden has been stable recently after a long upward climb-should help offset any upward pressure on commercial loan loss rates.

Specifically, consumer credit growth has slowed during the past 24 months, on both an absolute basis and relative to personal income growth.

"Sustained strength in consumer fundamentals is a critical component to the overall economic strength influencing commercial loan loss rates," she noted.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.