The Dow, driven by computer-guided buy programs and gains in General Electric Co., General Motors Corp. and International Business Machines Corp., jumped 33.25 points, to 3,710.77, closing above 3,700 for the first time and breaking its previous high, set Nov. 2.
Today's vote in the House "will send a signal around the world," said Barbara Friedman, a vice president at Loomis Sayles & Co. in Boston. "If we vote down NAFTA, it's very much a vote for protectionism."
Broader market averages were mostly higher, as the Standard & Poor's 500 Index rose 2.98, to 466.73, just below its Oct. 15 high of 469.5, and the Dow Jones transportation average climbed 6.84, to a record 1,759.98.
But the Nasdaq Combined Composite Index of smaller stocks fell 0.76, to 771.69, led by declines in MCI Communications Corp., Snapple Beverage Corp. and Synoptics Communications Inc. At one stage, the Nasdaq index tumbled as low as 767.16.
Advancing stocks on the New York Stock Exchange exceeded declining issues by a margin of about 9-to-8. Volume on the NYSE was a heavy 304 million shares.
Treasury Secretary Lloyd Bentsen said yesterday that the Clinton administration is "awfully close" to getting the 218 votes needed for passage in the House of Representatives.
Multinational companies "would be beneficiaries if NAFTA went through, because of its implications for Asia [trade] talks" later this week and negotiations on the General Agreement on Tariffs and Trade in December, Mr. Brown of Rutherford, Brown said.
Some suggested that NAFTA's benefits would go beyond economic growth. The resulting increased competition would help cap inflation and keep interest rates low, said Dan Marciano, senior vice president for equity trading at Dillon, Read & Co. "If [NAFTA] doesn't go through, it might lead to wage inflation" in the United States, he said.
That perception was reflected in a rebound yesterday in the Dow Jones utilities index, often a barometer for interest rates, which climbed 3.95, to 226.40.
"The consensus is that [President Clinton] will be able to push [NAFTA] through," Mr. Marciano said.
Stocks got an early boost from a slide in interest rates, fueled by expectations of a favorable NAFTA vote. The yield on the 30-year Treasury bond fell to 6.13 percent early before settling at 6.16 percent, up from 6.15 percent Monday.
"People aren't convinced this package will pass, but indications are that it will," said Edward Collins, head trader at Daiwa Securities. "Look at Telmex's stock." Shares of Telefonos de Mexico, the Mexican telecommunications company, rose $2.50, to $56.875. The stock has risen about 12 percent in the past week.
"It has some serious implications if [NAFTA's] not passed," said James Solloway, director of research at Argus Research. "It may not show up immediately in a market reaction, but it would send a loud message that the U.S. is abdicating its leading role in terms of being the leading light of free trade and have negative implications for our relationship with Mexico and all of Latin America."
A decline in Caterpillar Inc.'s stock clipped nearly 3 points off the Dow. Caterpillar fell $1.125, to $88.75, after having fallen as low as $86.50. Donaldson Lufkin & Jenrette Inc. cut its investment rating on Caterpillar to "moderately attractive," from "buy."
"Caterpillar has been a bellwether stock for this market, so when it fell, it put pressure on the entire market," said Joseph Battipaglia, a managing director of Sterling Advisors, the money management arm of Gruntal & Co.
General Motors Corp. rose $1.25, to $52.75, after the company reported higher-than-expected sales for the early-November period. GM also said it was considering contributing 185 million shares of its Electronic Data Systems Corp. to reduce its unfunded pension obligation, which is expected to reach $24 billion by year's end.
AMP Inc. fell $2.75, to $60. The world's largest provider of electronic-connection devices said it expects its fourth-quarter earnings to fall below analysts' expectations because of weakness in overseas markets. Third-quarter sales will be about $20 million to $25 million below expectations.
Computer Sciences Corp. rose $2.25, to $99.625. British Aerospace said it would use Computer Sciences as its preferred supplier for information-technology functions of its aerospace and defense businesses.