NEW YORK -- Falling interest rates and renewed optimism about the economy provided the push needed for blue-chip Dow stocks to catch up yesterday with the rest of the pack and set an all-time high.
The Dow Jones industrial average closed up 42.95 points, to 3,416.74, surpassing the old record of 3,413.21, set June 1, 1992. Other indexes have been trading at record highs throughout the week, but the 30-stock Dow index had been held back by worries about the big companies it comprises.
On the New York Stock Exchange, advancing common stocks outnumbered declining issues by about 2-to-1. Volume was 346.48 million shares, the seventh-largest trading total ever.
Analysts said Wall Street was at least temporarily content that the Clinton administration will not act to derail the economic recovery.
"The market is having its bout of optimism about the economy and Clinton," said Peggy Farley, managing director of Amas Securities Inc.
The good cheer was caused partly by Germany's and Japan's central banks, which lowered interest rates yesterday. Although the cuts were modest and regarded as mostly symbolic, some investors are hopeful that the foreign central banks will cut further, which would help Europe's economies.
The German cuts, however, had been largely anticipated, so much of yesterday's buying was "caused by the economy, stupid," said William Lefevre, editor of Monday Morning Market Memo.
Yesterday, for example, the Labor Department reported that the productivity of U.S. workers shot up 2.7 percent in 1992, the largest gain in two decades. In addition, the Commerce Department reported that orders received by U.S. factories rose sharply in December.
Besides the government reports, the Clinton administration's plans to stimulate the economy through a $31 billion spending program has been seen as noninflationary -- if not unnecessary, Mr. Lefevre said.
With inflation not a threat, bond rates have continued to fall, with the yield of the 30-year bond sinking to its lowest level since 1986. The lower interest rates have driven money into the stock market as investors search for good returns.
Stocks that did well yesterday were generally supported by strong earnings or prospects of good profits.
Besides the Dow, other broader measures of the market also hit new highs. The Standard & Poor's 500 index rose 2.36, to 449.56; the New York Stock Exchange Composite index rose 1.53, to 247.98; and the Dow Jones transportation average added 37.06, to 1579.54.
For the first time in months, investors pulled money out of high-tech stocks in NASDAQ trading. Microsoft Corp., for example, declined $3.375, to $85. The nation's biggest supplier of personal computer software was removed from an analyst's "buy" list at Smith Barney, Harris Upham & Co.
Instead, traders were more interested in the big industrials on the Dow that had been out of favor.
Chrysler gained 75 cents, to $39.75. Its 1993 earnings estimates were raised by Merrill Lynch. Separately, Kirk Kerkorian, a leading investor, boosted his stake in Chrysler by buying 4 million shares through Bear, Stearns & Co. on Monday.
GM, however, fell $1.25, to $37.875. The automaker was found negligent of faulty design and was ordered to pay damages of $105.2 million to the family of a teen-ager who was killed in 1989, when his GM pickup truck exploded after being struck on the side.
Retail stocks advanced on reports that sales exceeded expectations in January. J.C. Penney Co. rose $1.75, to $78.75; Gap Inc. gained $1.375, to $36.75; Caldor Corp. rose $2.375, to $33.625; and Circuit City Stores Inc. rose $2, to $55.75.