Interest Rate Prospects Fuel Rally

Stocks staged a powerful advance again Tuesday, as rising expectations that the Federal Reserve would cut interest rates to prod a clearly weakening economy pushed the Dow Jones industrials to a third straight record.

The Dow Jones industrials average rose 76.23 points to close at 5,381.21, its fifth record close in the past seven trading days. Having cracked the 5,300 mark for the first time on Monday, the index of blue-chip companies is now less than 20 points from 5,400.

Advancing issues outnumbered decliners by nearly 2 to 1 on the NYSE in heavy volume that totaled 464.33 million shares as of 4 p.m., up from 362.87 million on Monday.

The day’s tone was far more confident than Monday’s, which was muted by uncertainty about how this week’s release of many long-delayed economic figures would impact on a key Federal Reserve meeting on interest rates.

Tuesday morning, the Commerce Department reported that retail sales edged up a paltry 0.3 percent in December. In addition, a private research group reported that consumer confidence sank in January to its lowest level in nearly two years.

Investors interpreted the reports as a sign that the Fed will cut interest rates today as its policy-makers end a two-day meeting. Lower rates would mean cheaper borrowing costs for companies, making stocks more attractive.

Some of the stocks that moved substantially or traded heavily Tuesday:

NYSE

General Motors, up 1-3/8 to 53-3/8.

The nation’s leading automaker reported that its fourth-quarter earnings rose 18.7 percent to $1.9 billion, or $1.98 a share, exceeding analyst estimates.

Eastman Kodak, up 1-3/4 to 72-7/8.

Salomon Brothers raised its investment rating on the stock to buy from hold, citing good prospects for the company’s new digital products and film format, asset sales, industry consolidation and international expansion.

NASDAQ

Apple Computer, down 1-13/16 to 27-5/16.

Standard & Poor’s lowered its rating on $300 million worth of Apple’s debt to “junk” status, citing expected operating losses, uncertain strategic direction and management turmoil.

AMEX

Hasbro, unchanged at 43-3/4.

The toymaker reiterated its opposition to Mattel’s $5 billion takeover bid, citing antitrust concerns.