Blue-chip stocks rallied in New York for a second straight session yesterday, surprising Wall Street with its momentum a day ahead of the Federal Reserve's interest rate announcement. At the close of trading, the Dow Jones industrial average was up 160.20, or by 1.5 per cent at 10,815.35, extending Monday's 102.59-point gain. Volume was light throughout the session, magnifying price swings and suggesting that the rally, while broad-based, lacked conviction.

Other market indicators were also higher, although their gains lagged the Dow. Advancing issues outnumbered decliners by a 5-to-3 margin on the New York Stock Exchange, with 1,861 up, 1,102 down and 596 unchanged. NYSE volume totalled 811.52 million shares, against 641.15 million in the previous session.