Highlights of Tuesday's market activity, compiled from Times staff and wire reports:
* Blue chip stocks closed at a record high--the seventh in eight sessions--as late buying overcame profit taking.
* Bond yields fell further amid rumors that the government's report on December employment, due Friday, will show new evidence that the economy weakened at year's end.
After trading in negative territory most of the day, the Dow Jones industrial average finished strongly to close up 4.70 points at 3,204.83, a record high.
The Dow's gain would have been much greater except for a sharp selloff in oil stocks, which tumbled with a steep slide in oil prices.
Tuesday's up-and-down session amounted to a second pause after an 11-day rally, as buyers sold some stocks to take profits. Advancing issues only slightly outnumbered declining ones on the New York Stock Exchange.
Big Board volume continued to be heavy at 252.78 million shares, up from Monday's 242.21 million.
"Investors are trying to find groups and issues which are more sensitive to changes in the economy and others which are fairly valued or undervalued," said analyst Hugh Johnson at First Albany Corp. "Today they found them in airlines, chemicals and technologies."
Meanwhile, small stocks also advanced strongly, with the NASDAQ composite index of over-the-counter stocks rising to its eighth-straight record finish, adding 4.39 points to 602.29, its first close over the 600 mark.
Ralph Acampora of Prudential Securities said investors searching for value continued to flock to small stocks.
"Small-cap stocks look great," Acampora said. "Part of the fuel is the public because they will buy $8 or $10 stocks, but they won't buy a Merck," which trades in the $160 range. "It tends to feed on itself."
Analysts said the stock market is attracting an ever-growing hoard of money from investors switching out of low-yielding bank certificates of deposit.
Among the market highlights:
* Airline stocks leading the market higher included UAL, parent of United Airlines, up 2 5/8 to 151 5/8; AMR, parent of American, up 2 1/8 to 75; USAir, up 3/4 to 14 1/8, and Southwest Airlines, up 3/4 to 35 3/4.
Among air-freight firms, Federal Express surged 1 3/8 to 39 5/8 and Airborne Freight rose 1 3/8 to 25 3/8.
* Chemical stocks moving up included Dow Chemical, up 2 3/4 to 54 5/8; Union Carbide, which climbed 1 1/2 to 23, and Ethyl, up 1 1/8 to 28 3/8.
* Among technology issues, most personal computer stocks roared. Mark Stahlman, analyst at Alex. Brown & Sons, raised his quarterly earnings estimate on long-depressed Compaq Computer, which rocketed 3 1/8 to 34.
Elsewhere, Apple Computer was up 1 1/8 to 59 1/8, Dell Computer rose 1 5/8 to 29 7/8 and AST Research leaped 1 1/8 to 19 5/8.
But Advanced Logic Research plunged 2 to 8 after the Irvine-based company said increased competition will result in sharply lower first-quarter earnings.
* Other tech stocks that jumped included Motorola, up 2 1/8 to 68 3/8; IBM, up 2 3/8 to 94 5/8; Microsoft, up 3 1/2 to 120; Cadence Design, up 1 5/8 to 25 1/4; and Honeywell, up 2 7/8 to 68 1/4.
* Biotech stocks gained. Immune Response soared 4 3/4 to 44 3/4, California Biotech rose 1 1/8 to 25 and Cytel leaped 2 to 16 3/4.
* Also in the health care area, home health care firm Homedco surged 2 to 26, and Salick Health Care rose 1 1/4 to 13 1/2. Salick, a cancer-treatment provider, reported quarterly earnings up 21%.
Medical-products firm Sunrise Medical rebounded 2 3/4 to 32 after plunging 7 Monday. The big drop came on a forecast of weak quarterly results. Another winner was Diagnostic Products, up 5 7/8 to 44 after forecasting a 1992 earnings growth rate in the mid-teens.
* The market's only major weak spot was energy stocks. Oil issues fell across the board on worries about a new oil-supply glut.
Chevron sank 1 3/8 to 67 1/8, Arco tumbled 5 to 105 1/4, Unocal dropped 1 1/4 to 21 1/2, Halliburton gave up 1 1/8 to 26 7/8 and Oryx lost 2 to 23 3/4.
Overseas, Tokyo stocks ended lower on profit taking. The Nikkei average slipped 234.79 points, or 1%, to 23,566.39.
Shares finished mostly lower in Frankfurt, with the DAX average falling 10.87 points to 1,592.45. Shares also fell in London, where the Financial Times-Stock Exchange 100-share average was down 10.3 points at 2,482.9.
Interest rates continued to slide, helped by rumors.
The strongest rumor was that the Labor Department will report on Friday a larger-than-expected drop in non-farm payrolls for December, said economist Kathleen Camilli at Ramirez Capital.
Traders believed that if the rumors were true and the report showed continued economic weakness, the Federal Reserve would be pressured to lower interest rates again.
The price of the Treasury's bellwether 30-year bond, which was down slightly at midday, closed up 7/16 point, or about $4.38 per $1,000. Its yield dropped to 7.39% from 7.43% Monday.
Camilli discounted the rumors, saying "this often happens in front of employment reports."