GOOD NEWS FOR INVESTORS, BORROWERS : Dow Jones Rockets 65 to Hit Record High : Markets: Blue chip index soars to close near 3,470. A surprise rally in Japanese stocks pushes the Nikkei past 18,000.

Blue chip stocks zoomed to new all-time highs Monday in what appeared to be a delayed reaction to Friday’s strong February employment report.

A surprise rally also powered Japanese stocks to their highest levels since late December, and early today sent the Nikkei share index over the 18,000 mark.

Combined, the New York and Tokyo buying sprees--and a sputtering U.S. bond market--lent more credence to the view that the world economy is closer to renewed growth than another downturn.

The Dow Jones industrial average soared 64.84 points, or 1.9%, to 3,469.42 on Monday, surpassing the old peak of 3,442.14 reached on Feb. 5.

Stocks had attempted to rally on Friday after the government said the economy in February created jobs at the fastest pace in nearly four years. But the Dow’s rise of 35 points at its peak Friday later faded, and the index closed up just 5.67 points to 3,404.58.

On Monday, however, buyers took control of the market from the opening bell, and the rally built on itself throughout the day. Even after crossing the 50-point-gain mark late in the day--which triggered a slowdown in computerized trading techniques--the Dow continued to rise.

Winners swamped losers by 3 to 1 on the New York Stock Exchange on heavy volume of 274 million shares. Along with the Dow, other major indexes reaching new highs included the Standard & Poor’s 500 index, which leaped 8.60 points to 454.71, and the NYSE composite, up 4.16 points to 250.15.

A. C. Moore, investment strategist at Argus Investment Management in Santa Barbara, said the market on Monday was driven by “lower interest rates, higher corporate earnings expectations and (the fact that) Capitol Hill is saying many of the right things” about cutting the federal budget deficit and boosting economic growth.

Until recently, stocks had been weighed down by concerns that President Clinton’s proposed tax increases would slow the economy’s recovery. While interest rates have tumbled since early February, stocks have had trouble gaining new momentum.

But the February employment report clearly caused many investors to reconsider the slow-growth scenario: The stocks that led on Monday were industrial issues that would have the most to gain from a sustained pickup in the economy.

Some analysts also said Monday’s rally was in part a delayed reaction to this year’s sharp decline in interest rates. Lower bond yields automatically make stocks appear more valuable.

“The bond market is finally kicking the stock market in the butt,” said Louis Navellier, an Incline Village, Nev., investor who manages $600 million for clients.

Ironically, bonds provided little help for stocks on Monday. Long-term bond yields managed to decline slightly Friday even in the face of the strong employment report. That rally continued early Monday, when the yield on the benchmark 30-year Treasury bond dipped to 6.66%, lowest in decades.

But sellers moved into the bond market later Monday, and the 30-year T-bond yield finished at 6.72%, down just 0.02 points from Friday.

Also, shorter-term yields, such as on one-year Treasury bills, rose slightly Monday after sizable jumps on Friday. Short-term rates are most sensitive to turns in the economy.

“The bond market opened with a speculative burst of buying from technical traders,” said David Rosenberg, manager of the Delaware Treasury Reserves mutual fund in Philadelphia. But the traders’ attempt to prolong the rally “failed miserably,” Rosenberg said. “That’s a sign of a market top.”

Many analysts have been arguing for weeks that interest rates were falling too fast, and that the strength of the economy suggested that bond yields could rebound at least temporarily this spring.

Meanwhile, Moore and other analysts believe that the stock market is in a transition phase, becoming less driven by interest rates and more driven by expectations of rising corporate earnings as the economy grows.

If earnings advance, “you can have a backup in interest rates and it won’t matter in the least to the stock market,” Moore said.

Hopes for faster economic growth also helped drive key overseas markets Monday, which primed U.S. stocks for their advance.

In Tokyo, the Nikkei index shot up 868.77 points, or 5.2%, on Monday to 17,686.47, the highest close since Dec. 22. Analysts said the market was driven partly by futures-related trading, but that investors were also encouraged by rumors of a massive new public spending program to pull Japan’s economy out of its funk.

Early today, the Nikkei soared over the 18,000 mark. At midday, the index was up 357.48 points to 18,043.95.

In London, the FTSE-100 index leaped 35.20 points to 2,957.30 Monday, a new record. Frankfurt’s DAX index also rose, adding 12 points to 1,694.82. A surprise move by Germany’s central bank to ease interest rates slightly late last week spurred new hopes that Europe’s recession might end some time later this year.

Among U.S. market highlights:

* The NASDAQ market posted moderate gains compared to blue chips. The NASDAQ composite index rose 5.86 points to 687.23, half the Dow’s percentage gain on the day.

* Industrial issues pacing the market’s gains included Alcoa, up 2 1/8 to 72; Cummins Engine, up 2 1/2 to 91 3/8; International Paper, up 2 7/8 to 66 5/8; Dupont, up 2 to 48 3/4; Goodyear, up 2 1/8 to 74 1/4, and Litton, which added 1 to 52 1/4.

* Technology stocks also were strong. Motorola zoomed 1 3/4 to 62, Intel jumped 3 1/4 to 119, Dell Computer surged 3 1/8 to 33 5/8, and Compaq rocketed 3 7/8 to 48 3/8.

* Retail issues advanced. They would benefit if faster U.S. job growth translates into higher consumer spending. Sears rose 1 1/8 to 54 1/8, Dayton Hudson gained 1 7/8 to 81 1/8, Circuit City jumped 2 to 52 5/8, and Home Depot was up 1 3/8 to 64 5/8.

* Brokerages, beneficiaries of the bull market, soared. Charles Schwab rocketed 2 3/8 to 35 1/4, Merrill Lynch jumped 1 1/2 to 71 1/4, and PaineWebber added 1 1/8 to 25 1/4.

Other Markets

The dollar’s rally stalled Monday, failing to take strength from the stock market’s advance.

The dollar had surged more than three pfennigs Friday against the German mark after the unexpectedly strong U.S. employment data.

But on Monday, the dollar traded late in the day at 1.664 marks, off from 1.669 Friday.

The dollar was also changing hands at 116.81 Japanese yen, down from 117.60 Friday.

“People were disappointed,” said James McGroarty, senior vice president at Greenwich CapitalMarkets in Connecticut. “The upside momentum has slowed down considerably from Friday.”

The action was much greater in commodity markets: Hog and pork belly futures surged on the Chicago Mercantile Exchange amid deepening supply fears after two weeks of lower than expected hog butcherings.

Live hogs for April delivery rose the permitted daily limit of 1.50 cents to 48.75 cents a pound, the highest price for near-term hog futures since June 23.

Frozen pork bellies for March delivery rose the 2-cent limit to 47.17 cents a pound, the highest price for near-term deliveries since Sept. 27, 1991.

Pork belly futures have risen for five straight weeks and hog futures have advanced in three of the last four, partly because of the lack of an expected rise in slaughters.

“I think the market is trading a shortage of hogs, or a perceived shortage, that implies that the recent hogs and pigs report overestimated the numbers,” said Joe Kropf, commodity analyst with Bill Helming Consulting Services in Shawnee, Kan.

Elsewhere, lumber pricers also continued their dramatic advance. Spruce two-by-fours for March delivery soared $17.40 to $492.40 per 1,000 board feet on the Chicago Mercantile Exchange, extending a record-breaking rally driven by tight supplies.

On New York’s Comex, March gold dropped $2.70 to $327.10 a troy ounce. March silver fell 3.5 cents to $3.54.

On the New York Merc, light, sweet crude oil for April delivery fell 22 cents to $20.71 per barrel.

Market Roundup, D10