Dow Up 31.53 to New Record; Most Issues Lag : Market Overview

* While most stock indexes managed only meager gains ahead of President Bush’s State of the Union address, blue chips defied the norm by surging nearly 1% to their eighth record this year. The Dow Jones industrial average surged 31.53 points to 3,272.14, breaking the record of 3,264.98 set Jan. 17.

* Bond yields fell in thin trading after a report showed that consumer confidence dropped again this month.

Stocks

Market analysts downplayed the Dow rally, noting that a handful of stocks in the index--notably Procter & Gamble, Walt Disney and Texaco--accounted for almost all the gain.

The market’s overall performance was unimpressive, with advancing issues outpacing losers by a narrow 881 to 813 on active New York Stock Exchange volume of 217.18 million shares, compared to 190.97 million Monday.

Other measures of the broader market were mixed. The Standard & Poor’s index of 500 stocks lost 0.03 to 414.96.

Investors were cautious ahead of Bush’s speech, in which he was expected to offer a program of tax cuts and other incentives to revive the economy.

“I think Bush’s determination to keep the budget agreement intact will be one of the most reassuring things he could say to the financial markets,” said Ron Hill, strategist at Brown Bros. Harriman.

Ron Doran of C. L. King said that while possible elements of Bush’s economic plan have been well discussed in the media, there was still an element of doubt.

“He’s been known to surprise us in the past,” Doran said.

Among the market highlights:

* Procter & Gamble and Disney gained sharply on surprisingly strong quarterly earnings reports. P&G; jumped 5 1/2 to 102 5/8, and Disney soared 9 to 141 1/2.

Texaco added 1 1/4 to 62 5/8, though there was no news.

* Home builders’ stocks jumped on expectations about Bush’s proposals to spur the housing market. Kaufman & Broad rose 3/4 to 21, Standard Pacific gained 1 to 14, Ryland added 1 1/4 to 27 1/2 and Lennar soared 1 3/4 to 46 7/8.

* Paper stocks continued their recent advance. Scott rose 1 1/8 to 41 1/8, Georgia-Pacific added 1 5/8 to 66 3/8 and International Paper jumped 1 3/4 to 76 1/8.

* Compaq Computer, extremely volatile of late, slumped 2 3/8 to 32 3/4 after posting a sharply lower profit.

* Biotech stocks in general were lower. Centocor fell 1 1/2 to 49 3/4, and Xoma rose 7/8 to 24. A Robertson Stephens analyst said Xoma’s drug to treat septic shock may receive U.S. approval about the same time as Centocor’s Centoxin.

* Southland firm Datron Systems fell 1 1/2 to 11. The company said it expects its defense earnings to continue falling due to weaker government spending.

* Storage Technology jumped 10 to 65 1/2. It unveiled its long-awaited Iceberg storage device and reported 1991 results.

Overseas, Tokyo stocks closed higher in thin trading. The 225-share Nikkei average rose 383.41 points to 21,390.52.

Shares closed just under the day’s highs on London’s exchange. The Financial Times 100-share average was up 12.1 to 2,552.0. In Frankfurt, the DAX average slipped half a point to 1,683.08.

Credit

Bond yields fell on the assumption that the Federal Reserve could cut interest rates again soon to help the economy.

The price of the Treasury’s 30-year bond was up 3/4 point, or $7.50 per $1,000. Its yield dropped to 7.66% from 7.72% Monday.

The January consumer confidence index from the Conference Board fell to 50.4, a loss of 2.1 points from December. The news suggested the economy remained weak enough to merit further interest rate cuts by the Fed.

The federal funds rate, the rate on overnight loans between banks, was 3.94% versus 4.00% Monday.

Currency

The dollar settled mixed on currency markets in seesaw trading ahead of President Bush’s address.

“The (currency) market is a little scared--there is some trepidation ahead of the speech,” said Randolph Donney, research director at Pegasus Econometric Group in Hoboken, N.J. “But there is no real strong trend.”

The consumer confidence report caused the dollar “to come off a bit,” said John McCarthy, trader at ABN-AMRO Bank, noting that traders “overshot it on the downside.” The currency recovered from its lows but still closed down.

In New York, the dollar fell to 1.599 German marks from Monday’s 1.611. It rose to 125.70 Japanese yen from 125.23.

Commodities

Large coffee supplies sent prices reeling for a fourth consecutive session and could threaten the all-time low on New York’s Coffee, Sugar and Cocoa Exchange.

Coffee for delivery in March settled 1.05 cents lower to 74.05 cents a pound.

Traders in coffee futures remained pessimistic that the International Coffee Organization would return to quotas next week given Brazil’s likely rejection of quotas. Prices also tumbled on word that Brazil, the world’s leading exporter of coffee, is still making record shipments and Colombia may make a large delivery soon.

On New York’s Comex, January gold settled up $1 at $355.80 an ounce; silver rose 2 cents to $4.17.

Light, sweet crude oil for March delivery slipped 19 cents to $19.17 a barrel on the New York Merc.