July 27, 1984

The stock market extended its gains yesterday for a second session in a broader-based upswing. The rally, which came on active trading, was paced by further improvement in the credit markets and gains among the airline stocks. On the New York Stock Exchange, the Dow Jones industrial average closed up 10.60 points, to 1,107.55. In the last two days, the Dow has gained 21 points. It had closed at a 17-month low Tuesday.

The Continental Rescue The Government announced a $4.5 billion package of support for Continental Illinois, in an extraordinary intervention into the banking business. The plan, which includes $1 billion of fresh capital, gives effective control of the bank to the Government, which also assumes $3.5 billion in delinquent loans. (Page A1.) The move shows that Washington is willing to accept responsibility for the success of individual enterprises, as well as the economy in general. (A1.) Named to breathe life into the bank were John Swearingen, former chairman of Standard Oil of Indiana, and William Ogden, former vice chairman of Chase Manhattan. (D17.) The rescue package could make Continental prosperous, analysts said. But in Washington questions were raised about the scope of banking regulations. (D17.)

The Federal Communications Commission, seeking to further encourage media competition, voted yesterday to increase the number of commercial television stations that an individual or company may own. The increase, to 12 stations from 7, and a decision to remove nearly all restrictions on ownership of broadcast outlets in 1990 repealed a 31-year-old rule. The commission's actions, taken by a 4-to-1 vote, will also allow ownership of up to 12 AM and 12 FM radio stations until the restrictions end in 1990. Individuals and companies had previously been limited to owning seven of each.

The decision to save the Continental Illinois National Bank and Trust Company appears to prove once again that Washington has accepted far-reaching responsibility not only for the success of the economy, but also for individual enterprises - if they are big enough. At the same time, the rescue appeared to strengthen the hand of Congressional Democrats, and a few Republicans, who argue that banks are profoundly different from other lines of business - essentially because of their importance as a source of funds for business - and that they require tighter restraints and supervision than other companies. On its face, the $4.5 billion rescue of the big Chicago bank departs significantly from the preference for market discipline - the sink or swim philosophy - that the Administration has proclaimed as the linchpin of its economic policy and its effort to deregulate business and industry. The banking agencies agreed to provide help for one reason: ''to avoid general instability in the financial system,'' as the official announcement said. The fear was that Continental's failure would set off financial chaos. That fear has been voiced by Government officials - from the Federal Reserve System, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, in public declarations and private comments - ever since the shoring-up of Continental in May.

''I got my house, I got my tomatoes, I got whatever I need.