Dow Index Poised to Top 4,000 as Optimism Spurs 33-Point Gain : Markets: Analysts also credit surge in Japan’s Nikkei average with driving U.S. stocks to a third straight record high.

The Dow Jones industrial average and other major market indexes surged to record highs Monday on strength in foreign markets and general optimism about the economy.

The Dow’s sharp advance, which put it within striking distance of the benchmark 4,000 level, was led by stocks of cyclical companies that benefit most from an expanding economy such as autos, heavy machinery and mining. On Friday, a government reading on the economy showed strong growth and low inflation.

The Dow set its third consecutive record, rising 32.93 points to 3,978.36, eclipsing its previous high of 3,945.43 set Friday.

In the bond market, long-term interest rates rose despite initially holding steady on suggestions from Federal Reserve Chairman Alan Greenspan that inflation remains under control for now.

In the broader market, advancing issues outnumbered declines by about 2 to 1 on the New York Stock Exchange.

Big Board volume rose to 322.87 million shares, up from 313.14 million in the previous session. January was the busiest month on record for the exchange, with total share volume of about 6.6 billion.

The market started the day strong, following stock prices overseas, and never looked back.

Japanese stocks surged 7.8%, while rallies took key indexes in Mexico City, London and Paris to record high closes.

Tokyo’s 225-issue Nikkei stock average soared 1,471.24 to 20,229.12, a three-month high, after the weekend approval of political reform plans by Japan’s Parliament.

Mexico City’s Bolsa index ended 38.17 points higher at 2,781.37. In Frankfurt, the DAX 30-share average closed at 2,177.45 up 43.98 points, while London’s Financial Times 100-share average closed at 3,491.8, up 44.4 points.

“The story of the day is Japan, and that’s what’s moving our market,” said James Melcher, president of Balestra Capital in New York.

Traders said Greenspan’s comments to Congress that inflation may be lower than actually reported gave further confidence that the low-interest-rate environment is likely to remain.

The market paid little attention to Greenspan’s main message that short-term interest rates are “abnormally low” and are likely to be moved higher.

While some interpreted Greenspan’s testimony to mean a rise in short-term interest rates could come in six months, others said they thought the remarks meant that long-term rates could be moving lower.

Meanwhile, analysts said Monday’s reading on the economy had little impact on stocks. The Commerce Department reported that Americans’ personal income rose 0.6% in December. Private economists had expected a 0.5% rise.

The Standard & Poor’s 500, New York Stock Exchange Composite and Nasdaq Composite indexes also wound up in record territory.

The Nasdaq index rose 3.94 to a record 800.47, eclipsing the record high of 796.53 reached Friday.

Among the market highlights:

So-called cyclical stocks rose sharply. General Motors climbed 2 to 61 1/4, Ford gained 1 3/4 to 67, Chrysler added 1 5/8 to 61 1/2, Deere jumped 2 5/8 to 80 1/2 and Scott Paper rose 1 5/8 to 46 3/4.

* Aluminum stocks were strong, with Aluminum Co. of America up 2 7/8 to 79 1/8, after aluminum-producing nations agreed to slash global production, putting the beleaguered industry on track for recovery. Alcoa was up 2 7/8 to 79 1/8, Reynolds Metals rose 2 1/4 to 53 1/2.

* Xerox rose 5 1/2 to 98 1/8. The company reported a fourth-quarter loss of $577 million largely because of special charges to cover the cost of a previously announced plan to eliminate 10,000 jobs.

* Tellabs lost 3 to 46 after the company said fourth-quarter earnings were 67 cents a share, compared to 46 cents in the same period last year.

Other Markets

Bond market analysts traced part of the rise in government bond yields to a wave of corporate borrowing, including a $1-billion deal from the Canadian province of Quebec. As part of corporate bond transactions, underwriters typically sell Treasury securities as a way to hedge against potential losses.

Monday’s sales were the first in a flood of expected corporate borrowing by foreign countries in the U.S. market this week.

The Treasury’s main 30-year bond yield rose 6.23% from Friday’s 6.21%. Its price, which moves in the opposite direction, dropped 5/16 point, or $3.13 per $1,000 in face value.

Ordinarily, comments by Greenspan would drive bond prices lower. Higher rates on new securities devalue already-sold bonds, which pay a fixed rate of return.

Most economists expect the Fed at some point to nudge up rates to curb the threat of rising prices as the economy continues to grow. But bond prices edged higher as investors apparently focused on Greenspan’s failure to offer a specific timetable for taking action.

Elsewhere:

* The dollar fell against most key currencies.

* On the New York Comex, gold closed at $381.60 an ounce, up $4.70 from Friday. Silver ended at $5.124 an ounce, up 11.6 cents.

* Light, sweet crude oil for March delivery fell 15 cents to $15.19 a barrel on the New York Merc.

Market Roundup, D8

Off to the Races

Most major world stock markets have soared in January, adding to last year’s hefty gains. January percentage changes, key market indexes:

Japan (Nikkei-225): +16.1%

Mexico (Bolsa): +6.9%

U.S. (Dow-30): +6.0%

Canada (TSE-300): +5.4%

Singapore (Straits Times): +3.6%

U.S. (S&P; 500): +3.2%

France (CAC-40): +2.9%

Britain (FTSE-100): +2.1

Hong Kong (Hang Seng): -3.4% Germany (DAX-30): -3.9%

Note: Data in local currencies.