NEW YORK -- Continuing a euphoric year-end rally, stock prices soared yesterday to record heights for a third straight session in a "buying panic."
The Dow Jones industrial average closed up 62.39 points at 3,163.91 on strong volume of 246 million shares, though the atmosphere at the New York Stock Exchange was subdued.
"It's a very quiet stampede," said Ralph Evans, a specialist on the exchange floor with Stern Bros. "We're in a sort of never-never land of perceptions that have changed overnight."
More than three issues advanced for every one that declined, indicating strong breadth to the rally. Good gains were registered by an array of major companies, with the most pronounced move on the part of brokerage firms, major beneficiaries of investor enthusiasm.
Share prices have surged daily since Friday, Dec. 20, when the Federal Reserve Board slashed short-term interest rates. Many major investors were leaving for Christmas vacations at the time, and the immediate rally was too muted to prompt changed plans.
But enthusiasm grew over the pre-Christmas weekend, and subsequently one brilliant day followed another. Since the Fed's action, the Dow has risen more than 9 percent, and broader indexes have rocketed up as well.
The sudden surge has washed over a largely deserted Wall Street. "No one expected this," said John Shaugnessy, head of research at Advest Inc.
"I've heard stories of people calling in from the ski slopes asking to buy 20 stocks just so they will be fully invested by year-end," he said. "It's a buying panic. A classic case."
Analysts suggested the rate cut revived hope of an economic expansion, as well as increasing investor dismay on returns for non-stock oriented investment. "We're seeing the tremendous effect of these lower rates," said Don Hays, market strategist at Wheat First Securities. "There's a lot of money, and where else can it go?"
Banks have already cut the interest paid on demand accounts, and rates on certificates of deposits have plunged.
Mr. Shaugnessy estimates there is in excess of $1 trillion now in certificates of deposit available "for reposition" into stocks or other financial assets.
Moreover, the interest rate cuts have been accompanied by an increase in money supply and an expansion of bank reserves, raising hopes that lending, and thus additional business activity, will soon pick up.
"We are ending two and one-half years of tight money," said Mr. Hays.
"Now, finally, banks have money to lend and they will lend it," he added.
In another boost, prior to the market's opening, the Bank of Japan cut its discount rate from 5 percent to 4.5 percent. That, Mr. Hays said, eased fears that even as U.S. rates were declining, overseas rates were on the rise, meaning foreign economies were likely to contract.
The market's strong gains were achieved despite a monthly report from the Conference Board suggesting that consumer confidence is awful.
The index on current conditions declined minutely from an already depressed level.
But, given the general upbeat spirit on Wall Street, several analysts suggested the Conference Board's survey was actually positive, in that the steep declines registered in prior months were absent.
"Psychology runs hot and cold," said Mr. Evans, summing up the day.
"Right now, it's hot, and stocks are the choice coins of the realm," he added.
Among Dow stocks, leaders included Philip Morris, up 2 1/2 at 79 3/4 ; Procter and Gamble, up 3 3/8 at 93 3/4 ; and Goodyear up 3 1/2 at 53 3/4 .
Elsewhere, Affiliated Bancshares surged 4 3/4 to 30 1/2 after Banc One Corp. announced that it has signed a letter of intent to acquire the Colorado company in a stock swap valued at $378 million.
On the American Stock Exchange, Bolar Pharmaceuticals spurted 2 3/8 , to 12 1/2 . The company's stock rose on takeover speculation fueled by a Wall Street Journal column and by Fidelity Investments' announcement that it had acquired a 5.5 percent stake.