Dow Hits All-Time High on Day of Quiet Trading : Market Overview

* The Dow Jones industrial average set a record high Tuesday on the strength of gains in pace-setting Sears Roebuck & Co. and Boeing Co.

* Long-term interest rates were unchanged despite a top Federal Reserve Board official saying the central bank should nudge short-term interest rates higher.

Stocks

Blue-chip stocks traded in record territory for most of the session, although there was little to motivate investors in either direction, analysts said.

But the bull run failed to spread to other stocks, which ended mixed in a lackluster session.

The Dow Jones average rose 8.67 points to a record closing high of 3,718.88, topping the benchmark 3,710.77 set Nov. 16.

In the broader market, advancing issues outnumbered declines on the New York Stock Exchange. Big Board volume came to 285.69 million shares, down from 292.37 million on Monday.

“It’s a quiet day. There’s nothing going on,” said David Shulman, chief market strategist at Salomon Brothers.

Some analysts said investors were anxious ahead of government inflation statistics scheduled for release later this week. On Thursday, the government will release November producer prices and on Friday, consumer prices.

As the economy has picked up, there has been some concern inflation may become an issue again. If that happens, and perhaps even before, analysts said, the Federal Reserve could raise interest rates.

Falling rates have helped fuel the stock rally of recent months. Low interest rates cut the cost of borrowing to companies and make stocks more attractive relative to interest-bearing investments.

And besides their concern about inflation, investors still worry about the economic recovery, analysts said.

“Now the markets have made an adjustment to the idea that the economy is growing at a faster pace, they are waiting to see how durable the pace of the expansion will be,” said James Solloway, director of research at Argus Research Corp.

Still, stocks ended mostly higher despite weak bond prices. Bonds were depressed partly by a jump in crude oil prices, which also could indicate inflation down the line.

Among the market highlights:

* Dow components Sears rose 2 1/8 to 54 1/4, and Boeing gained 2 1/8 to 41. Boeing was boosted by a buy recommendation from Salomon Bros., while Sears recovered ground lost in recent sessions.

* Higher oil prices helped petroleum-related stocks. Chevron rose 3/8 to 87.

* RJR Nabisco rose 1/4 to 6 1/2 after reporting it would cut its work force by 6,000 and take a fourth-quarter restructuring charge of $445 million.

* Southwestern Bell and Cox Cable Communications announced a $4.9 billion partnership to own and operate 21 cable systems. Southwestern Bell rose 1/8 to 43 1/2.

* Farm equipment maker Deere fell 3 3/8 to 70 3/8 after it tempered its sharply higher fourth-quarter earnings report with a conservative forecast for 1994.

* Shares of Upjohn rose 5/8 to 31 1/8 after the drug company named as John Zabriskie, a Merck & Co. executive, as chairman and chief executive officer. Merck fell 1/8 to 34 1/8.

* Browning-Ferris Industries gained 1 3/8 to 27 1/4, boosted by a Prudential upgrade of the stock.

But the market received little encouragement from abroad. Mexican shares pared early sharp losses Tuesday on a late surge of buying by foreign investors to close slightly lower. The IPC index of 36 leading shares ended down 2.06 points at 2,384.08.

Tokyo’s stocks ended modestly higher in volatile trading, with the Nikkei 225-share average rising 63.11 points to close at 16,903.49. In London, the Financial Times 100-share average closed unchanged at 3,237.3. Frankfurt’s DAX average ended 3.34 points lower at 2,115.46.

Credit

The remarks by David Mullins, vice chairman of the Federal Reserve Board, drove yields sharply higher in early trading.

Higher interest rates, a monetary tool used to help control inflation, would reduce the value of existing bonds and other fixed-rate securities because the government would have to offer higher yields on new bonds to attract investors.

Mullins’ remarks seemed to echo a consensus among economists that overall growth increased to an annual rate of between 3% and 5% in the fourth quarter.

The federal funds rate, the interest on overnight loans between banks, was 2.675%, down from 2.938% late Monday.

Other Markets

* The dollar was mixed in quiet, end-of-year trading as traders sold the greenback and pocketed profits from its earlier rise.

* Gold prices fell overseas and rose domestically. On the New York Comex, gold closed at $377.40 an ounce, up $1.50 from Monday and silver rose 8.9 cents to $4.906 an ounce.

* Crude oil rose 13 cents to $14.70 a barrel on the New York Merc.

Market Roundup, D6