Ebullience over the Federal Reserve's reduction of the discount rate sent stock prices soaring today, although analysts cautioned that the thin post-holiday trading volume magnified the gains.

"The one bugaboo I found with today was the light volume," said Larry Wachtel, an analyst at Prudential-Bache Securities. "The real test for this market comes Monday, when all the players are back."

Just 73.9 million shares changed hands on the New York Stock Exchange as many traders took the day after Thanksgiving off. Composite trading in NYSE issues, including activity elsewhere, was 87.4 million shares. Volume is often well over 100 million shares daily. In the relatively light volume, analysts say, market movements are magnified.

The Dow Jones industrial average zoomed 18.78 points to 1220.30, giving the average a gain of more than 32 points for the week, enough to make up about half of its loss in the slump following Election Day. Four stocks rose for every one declining on the New York Stock Exchange, and the NYSE composite index rose 1.31 to 96.10. The Standard & Poor's 500-stock composite index gained 2.40 to 166.92.

On the American Stock Exchange, the index rose 1.82 to 209.22, while the Nasdaq composite index of over-the-counter issues gained 2.44 to 245.45.

A stock market rally the day after Thanksgiving is not unusual: it has happened 29 times in the past 33 years, analysts said.

The impetus for the day's gain came after the market closed on Wednesday, when the Fed cut the discount rate to 8 1/2 percent from 9 percent. Wall Street, sensing an overall easing of interest rates, had been expecting the move for some time, but nevertheless the market opened today with an approving run-up and kept gaining ground through the day.

The apparent renewal of U.S.-Soviet arms talks also fueled the rally, analysts said.

But some analysts saw a dark underside to the joy over interest rates -- the perception that the decline in rates signals an economic slowdown that will hurt corporate profits in the long run even as the lower rates help company results in the short term.

In spite of the foreboding, blue-chip corporate issues led the market rise. Auto stocks were particularly strong, with General Motors going up 2 5/8 to 77 1/4, Ford rising 2 to 46 5/8, and Chrysler rising 1 3/8 to 28 3/8.

Computer stocks also were generally higher: IBM rose 2 1/4 to 122 5/8, Texas Instruments was up 1 7/8 to 122 1/2, Digital Equipment gained 1 5/8 to 105 and Cray Research went up 1 3/8 to 52 3/8.

With many companies closed for the four-day weekend, there were few tidbits of corporate news to move individual stocks. Among those affected by news developments, Colgate-Palmolive was off 5/8 to 25 1/8 after disclosing that its board had changed corporate bylaws to make a takeover of the consumer-products giant more difficult; Western Union fell 1 5/8 to 12 after reporting late Wednesday that it had lost an eight-year $100 million credit facility and that it was working on a corporate restructuring; and International Harvester was unchanged at 8 1/4 and Tenneco off 1/2 to 34 5/8 following persistent reports that Tenneco's J. I. Case division will soon acquire Harvester's financially decrepit farm-equipment division