Another New High Is Fueled by Blue Chips : Stock market: Dow leaps 25.40. Fixed-rate mortgages slip to their lowest levels in 20 years. But the small-issue NASDAQ is hit hard by profit taking.

Fueled by signs of an improving economy, blue chip stocks ran to another record close Friday as interest rates continued to fall, leaving fixed-rate mortgages at their lowest levels in 20 years.

But the good news on rates failed to buoy the NASDAQ market of smaller stocks, which was again hit hard by profit takers.

The Dow Jones industrials zoomed 25.40 points to a record 3,442.14, extending the gain for the week to 132.11 points, or 4%. Volume on the New York Stock Exchange topped 320 million shares for the third day in a row Friday.

The Dow’s sudden climb has been driven by signs of solid economic growth in the United States, which were magnified Friday by the government’s report that unemployment fell to 7.1% in January from 7.3% in December.

Despite the turnaround in the economy, however, interest rates have fallen sharply in recent weeks as bond investors have judged that inflation will stay low.

In addition, central-bank rate cuts in Britain, Japan and Germany over the last week have lent more credibility to the view that U.S. rates can edge still lower, even as the economy expands.

Yields on Treasury securities fell across the board Friday. The 30-year bond yield eased to 7.16% from 7.18% on Thursday. Two weeks ago, the yield was at 7.29%.

As Treasury rates have fallen, so too have mortgage rates. The Federal Home Loan Mortgage Corp. said Friday that the average rate on 30-year, fixed-rate mortgages hit a 20-year low of 7.80% this week, versus 7.86% a week ago.

It was the lowest weekly average since the week ended June 29, 1973, when the rate was 7.76%.

The decline, the eighth in nine weeks, is drawing buyers into the housing market and encouraging refinancing by homeowners who missed other chances to refinance.

“Rates have been coming down pretty quickly . . . and applications for both refinancing and purchases have responded pretty dramatically,” said economist David Lereah at the Mortgage Bankers Assn. in Washington.

Analysts note, however, that the decline in interest rates has been powered in part by optimism about President Clinton’s plan to slash the federal deficit over the next four years. If those plans begin to unravel, some bond pros worry that rates could shoot up.

“Financial markets are rallying on expectation that there will be a credible deficit-reducing package,” said Samuel D. Kahan, economist at Fuji Securities in Chicago. “It doesn’t matter what numbers you print up, people want to buy.”

The bond market will face a major challenge next week, as the Treasury attempts to sell $35.5 billion in notes and bonds at its quarterly refunding.

The stock rally, meanwhile, is showing definite signs of wear and tear, many experts say. Though increasing optimism about a revived global economy should continue to bring money into stocks this year, many issues have run up so quickly in recent months that they are vulnerable to pullbacks.

That was evident in the NASDAQ market of mostly small stocks Friday, where losing issues beat gainers 12 to 8 and the NASDAQ composite index slid 7.87 points, or 1.1%, to 700.98--even as the Dow rocketed to a new high.

The NASDAQ market has been weak since Jan. 27, when tech stocks that had led the market since October suddenly turned lower. The tech selloff continued Friday.

As NASDAQ issues have pulled back, investors have returned to the basic industrial blue chips best represented by the Dow. Many of those issues have lagged since last summer, but now are viewed as the biggest potential beneficiaries if consumer and business spending picks up around the globe.

Among the market highlights:

- Industrial leaders Friday included Alcoa, up 1 5/8 to 77 5/8; 3M Co., up 4 1/2 to 108 3/4; Dupont, up 2 1/2 to 49 5/8; Goodyear, up 1 1/8 to 74 5/8; Rohm & Haas, up 3 to 61 1/4; Owens-Corning, up 2 3/8 to 42 1/4, and Dow Chemical, up 2 3/4 to 57 5/8.

- Energy stocks also attracted buying. Arco added 3/4 to 118 3/8, Halliburton jumped 1 5/8 to 32 3/8, Phillips gained 5/8 to 28 1/4, Royal Dutch was up 1 1/8 to 83 7/8, and Schlumberger leaped 2 3/4 to 62 1/2.

- On the downside, tech issues were hammered again. Intel slumped 2 3/8 to 106 7/8, Apple dropped 2 1/4 to 57 1/4, Adobe Systems tumbled 2 1/8 to 41 5/8, Cabletron Systems fell 3 to 87, Creative Technology plunged 5 1/4 to 31 1/2, and Cisco lost 2 5/8 to 88 3/4.

Microsoft, however, jumped 4 to 89 as the Federal Trade Commission deferred action on its antitrust investigation of the firm.

- Biotech stocks were also sharply lower. Amgen plummeted 5 7/8 to 53 7/8 in the wake of its fourth-quarter earnings report. Several analysts said Friday that they were cutting their growth expectations for the firm, citing slowing sales of its two key drugs.

Mabon Securities lowered its investment rating on the stock to sell from hold . Montgomery Securities cut its view to hold from buy.

- Southland supermarket chain Vons slid 2 to 22 3/4, one day after the parent of Jack in the Box sued for damages resulting from recent food poisonings in the Northwest. Vons supplied the meat involved.

Overseas, German stocks surged, responding to a cut in interest rates there. Frankfurt’s DAX index rose 39.76 points, or 2.5%, to 1,641.37. In Paris, the CAC-40 index leaped 53.80 points to 1,908.18.

But in London, the FTSE-100 eased 3.0 points to 2,862.90.

In Tokyo, the Nikkei index added 142.27 points to 17,332.90.

Other Markets

The dollar got a new boost from the strong January employment report, but ended the session mostly unchanged as sellers stepped in.

The dollar ended at 1.657 German marks in New York, the same level as Thursday. Against the Japanese yen, the dollar eased to 124.37 from 124.65 Thursday.

In commodity markets, lumber futures embarked on another wild ride at the Chicago Merc, with the March contract soaring to the $10 limit while subsequent months closed as much as $10 lower.

The reason for the disparity was that many traders had used the later expiring contracts to get in on the wild bull market of the last nine trading days, and finally decided to take profits on those positions.

On the New York Merc, light, sweet crude oil for March slipped 9 cents to $20.21 a barrel.

On New York’s Comex, near-term gold lost 30 cents to $328.70, while silver lost 1.1 cents to $3.65.

Market Roundup, D6