After a major morning surge attributed to last week's unexpected drop in the money supply, the topsy-turvey stock market wound up a rumor-filled session with a loss, as the Dow Jones Industrial Average fell by almost 11 points.

The Dow industrials jumped more than 19 points within the first hour of trading, pushing the average to a new intra-day high of 1,260.80--12 points above the measure's record high closing point.

But then came the fall, caused by profit taking and rumors so persistent that they were formally denied by the Federal Reserve Board that the Fed might revise the money supply figures released Friday.

The reports quickly dragged stock prices down as trading on the New York Stock Exchange totaled 114.02 million shares, up sharply from the 77.9 million shares exchanged Friday. The volume was the highest since June 16, when the current Dow record was set.

Several market participants said that as market took off this morning and soared above the Dow record, the sharp gains triggered considerable automated preprogrammed trading by both institutions and individuals.

The exuberence with which the market opened this morning stemmed from the money supply figures, which Friday showed a drop of $2 billion for the final week in August. Those figures were widely read as indicating that the Fed is unlikely to tighten monetary policy and that interest rates would therefore remain stable.

Predictably, the interest rate thinking brought government and corporate bonds prices down today in moderate trading. However, many stock market analysts are cautious about stock prices as a result of continuing concern about corporate profits and the durability of the economic recovery.

"This is a market in which no one has no opinion," said William LeFevre, vice president for investment policy at Purcell, Graham, & Co. Inc. "What today's market tells you is that the bulls have strong convictions and so do the bears."

The Dow industrial average closed trading at 1,229.07, as 23 of the 30 stocks that make up that average lost ground. All told, the totals of advancing and declining issues were about the same, even though as the session began trading rising stocks outnumbered falling issues by a 10 to 1 margin.

The New York composite index fell 0.68 to 95.86. The average price per share fell by 25 cents. Brokerage stocks were particularly hard hit today with Merrill Lynch down 4 1/4 in heavy trading, E.F. Hutton off 2 1/2 and Phibro Salomon off 2 3/8.

On the American Stock Exchange, volume jumped sharply to 8.1 million shares, up from 6.2 million Friday, although the Amex index fell 0.83 to 234.18. The average price per share fell six cents, with 271 stocks advancing and 343 declining.

On the over-the-counter market, stocks were also slightly off with the Nasdaq composite index down 1.47, closing at 300.76. Declining stocks led gaining issues by 820 to 625.