U.S. Stocks Rise; Tokyo Rebounds Sharply

* On Wall Street, small stocks and industrial issues led a broad market rally, on more evidence of a strengthening economy.

* Tokyo stocks rocketed 4.4% after the government indicated it will speed up steps to boost the Japanese economy. The rally continued early today.

* Treasury bond yields eased despite new signs of economic growth and despite a surge in gold.

Stocks

Buyers jumped back into the market, responding to encouraging economic news and to the beaten-down prices of many stocks after several weeks of heavy selling.

The Nasdaq composite index of mostly smaller issues surged 9.42 points, or 1.3%, to 763.81, as telecom and technology stocks gained. Many of those issues had suffered severe profit taking in November.

The Dow industrials, meanwhile, added 13.13 points to 3,697.08. Early in the day, the Dow had traded over its all-time high of 3,710.77, but it fell back by the close.

The market’s breadth improved substantially: Rising stocks topped losers by 13 to 8 on the Big Board and 14 to 10 on Nasdaq.

Investors were encouraged by yet another report showing the economy on the rise. The National Assn. of Purchasing Managers said the backlog of orders for manufactured goods rose for the fourth consecutive month in November.

Also, the government said construction spending rose 2.5% in October, well above the 1% rise many analysts had expected.

Wall Street’s bullish mood was helped by a dramatic rebound in Tokyo. The Nikkei index leaped 718.77 points to 17,125.31 on Wednesday, the biggest one-day gain in nearly eight months, after the government promised fast efforts to stop the Japanese economy’s slide.

The Nikkei, which had fallen from 21,000 in September to 16,078 by Monday, was up another 501.05 points in afternoon trading today, to 17,626.36. Government officials said Prime Minister Morihiro Hosokawa next week will propose tax cuts and measures to facilitate land transactions, both steps aimed at reviving the economy.

Tokyo’s rally spilled into European markets. London’s FTSE-100 index jumped 66.3 points, or 2.1%, to a record 3,233.2. In Frankfurt, the DAX index gained 32.10 points, or 1.6%, to 2,089.87.

Among U.S. market highlights:

* Many of the smaller growth stocks that were slammed by profit takers in November bounced back. Analysts said some of the buying was “short covering,” or the repurchasing of shares by traders who had previously sold borrowed stock, betting that prices would drop.

Among telecom issues, DSC Communications gained 3 5/8 to 57 3/4, Qualcomm jumped 3 7/8 to 56 5/8, Newbridge Networks soared 4 7/8 to 53 7/8 and Tellabs added 2 5/8 to 43 5/8.

* Other growth stocks rebounding included Callaway Golf, up 2 1/8 to 54 1/4; Outback Steakhouses, up 1 1/4 to 34 1/4; Cabletron Systems, up 3 1/4 to 108, and Sybase, up 2 to 39.

* Auto stocks led a rally in industrial issues that should continue to benefit from a stronger economy. Ford jumped 1 7/8 to 62 5/8 after Chairman Alex Trotman said U.S. vehicle sales could reach a record 17 million cars and trucks a year sometime after 1995.

Other industrials rising included Allied Signal, up 1 1/8 to 72 1/4; Goodyear, up 7/8 to 45 3/8; Hercules, up 1 1/2 to 108 1/2; Great Lakes Chemical, up 1 1/4 to 75 3/4, and Deere, up 1 1/8 to 72.

* On the downside, Ventritex plunged 5 3/4 to 36 1/2. The government told the firm to halt exports of its Cadence cardiac defibrillator, citing “unsubstantiated” claims.

Other Markets

More news of economic strength failed to rile the bond market, which apparently had expected the latest reports to be even stronger.

The 30-year Treasury bond yield slipped to 6.26% from 6.30% on Tuesday. Shorter-term yields also fell. Interest rates have been rising slowly in recent months, responding to a string of reports showing an accelerating economy.

But Wednesday’s activity report on the U.S. manufacturing sector in November, while healthy, was less so than some bond traders had expected, analysts said.

Elsewhere:

* December gold futures jumped $5 to $374.80 an ounce on the New York Comex, and silver also rallied, rising 22.8 cents to $4.65. Traders cited expectations for faster economic growth and higher inflation.

* At the New York Merc, oil stabilized after the recent collapse to 41-month lows. January crude added 5 cents to $15.48 a barrel.

Interest Rates

30-year T-bond: 6.25%

1-year T-Bill: 3.57%