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Rise in Factory Orders Propels Dow Up 28.40 : * Markets: A number of stock indexes close at record highs. The Fed's interest rate cut seems to have injected some optimism.


NEW YORK — Stocks roared ahead and broad market indexes closed at record highs in abbreviated Christmas Eve trading Tuesday, as the rally touched off by the Federal Reserve's big discount-rate cut Friday was spurred on by positive economic news.

Frantic buyers drove the Dow Jones industrial average up 55 points, just above its all-time closing high of 3,077.14, before profit takers pared the gain to 28.40. The closely watched barometer of blue chip stocks finished at 3,050.98.

The Standard & Poor's 500 stock index, the New York Stock Exchange composite index and the Dow Jones equity market index all closed at record highs.

Orders for durable goods jumped 1.2% in November, the Commerce Department said, raising hopes that basic industries are beginning to recover from the recession. The monthly gain, which surprised experts, was the second in a row and fueled a small but growing sense of optimism that the new year may bring a recovery.

"There's a growing awareness that perhaps things aren't as bad as a lot of people thought," said Laszlo Birinyi, president of Birinyi Associates, a New York securities firm. Birinyi, whose firm tracks computer-driven program trading, said programs had a minor impact Tuesday, pulling the Dow industrials down 8 points.

The gains came on extraordinarily strong volume in a session that was two hours shorter than usual. Some 164 million shares changed hands on the New York Stock Exchange, down from 228.7 million Monday but more than three times the 57.2 million shares traded during a similarly abbreviated session a year ago.

"Investors are anticipating ideal stock market conditions in the months ahead--plodding 1% to 2% economic growth, coupled with low interest rates and low inflation," added Larry Wachtel, market strategist for Prudential Securities Inc. "Nobody wants to see a boom, which would bring rising inflation and interest rates."

Treasury bonds finished mixed. The bellwether 30-year bond rose 1/16 point, or 63 cents per $1,000 face amount, to yield 7.51%, down from 7.52% Monday. The 30-year issue recouped ground lost earlier in the session after the government reported the rise in durable goods orders. Prices of short-term Treasury bills fell and rates rose, with three-month Treasuries yielding 3.90% and six-month bills at 4.01%.

Tuesday's strong stock market followed Monday's explosive session, in which the Dow industrials rocketed 88.10 points, their sixth-biggest point gain ever.

"In a way, Tuesday's market was preordained by Monday's," Wachtel said. "When you have that kind of momentum, you usually get some follow-through."

Added Eugene Peroni, director of technical analysis at Janney Montgomery Scott Inc. in Philadelphia: "You could build a case that the train is leaving the station. Investors are warming up to stocks--either by want or by need."

Since the Federal Reserve cut its key discount rate by one percentage point Friday, to a 27-year low of 3.5%, the Dow industrials have climbed 135 points, earning investors nearly $150 billion in paper profits.

Lower rates bring the promise of higher corporate profits and greater economic activity while making stocks more attractive relative to bonds and other fixed-rate investments.

But newsletter writer Martin Zweig sounded a cautionary note. "The effectiveness of the discount-rate move or future tax-cutting remains to be seen," he said. "So for now the bulls have the Fed, and the bears have the economy. Sooner or later, the Fed will turn the economy, or else we'll have big problems."

Robert Kahan, trading chief of Montgomery Securities in San Francisco, was more bullish. "The market is exceedingly impressive, and buying is very orderly. People feel it's going to go higher. Don't fight the tape."

Among the highlights:

* For the second straight session, buyers bid enthusiastically for stocks in industries such as forest products, metals and air transport--sectors that are considered especially sensitive to the ups and downs of the economy.

In paper and forest products, for example, International Paper rose 1 1/2 to 69, Georgia-Pacific 2 7/8 to 56 5/8, Louisiana-Pacific 3/4 to 42 7/8 and Weyerhaueser 1/2 to 26 7/8.

Among the metals issues, Aluminum Co. of America gained 2 1/4 to 64 1/4, Phelps Dodge 2 3/4 to 66 5/8 and Asarco 3/4 to 20 5/8.

And in the airline group, UAL climbed 3 3/4 to 141 1/2, AMR 1 1/2 to 67 3/8 and Delta Air Lines 1 to 63 5/8.

* Mortgage and consumer-finance stocks also were notably strong. Federal Home Loan Mortgage rose 4 7/8 to 118 3/8, Federal National Mortgage 1 1/2 to 65 3/4, Household International 1 1/2 to 45 1/4 and Beneficial 7/8 to 58 7/8.

* Gainers among the blue chip industrials included McDonald's, up 1 1/4 at 39 1/4; General Electric, up 1 7/8 at 73 7/8; American Express, up 3/4 at 19 3/4; Sears Roebuck, up 1/2 at 35 1/4, and Philip Morris, up 5/8 at 74 1/4.

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