NEW YORK, DEC. 12 -- The Dow Jones industrial average closed 36 points higher today in choppy trading, marked by persistent program buying driven by expectations that interest rates have further to fall.

Jack Conlon, a market strategist at Rothschild Inc., said the prospect of further rate easing by the Federal Reserve had prompted "some good, old-fashioned American institutional buying."

Other analysts said that the massive buyback of CBS shares -- at a 12 percent premium over the previous market price -- and the rumored interest of a Japanese buyer in Hilton Hotels served as reminders that a number of solid American companies have been undervalued by the market.

At the close, the Dow stood at 2622.28, up 36.14, while advances outpaced declines on the New York Stock Exchange by almost a 2-to-1 ratio on moderately active volume of 182 million shares.

The buying produced some substantial rallies among blue-chip stocks, including IBM, up 1 1/2, to 114 3/8; Merck, up 2 1/4 to 88 1/2; Coca-Cola up 1 3/8 at 48 1/4; and Sears up 1 1/8 at 27.

Hilton Hotels Corp. rose 6 5/8 to 42 1/8 after trading as high as 43, amid persistent takeover rumors that a group of Japanese investors may make a $3.6 billion bid for the company.

Ford Motor Co. closed down 3/8 at 27 1/4 in heavy volume, dipping as low as 27 7/8, after the company's chairman, Harold A. Poling, told reporters in Detroit that he could not be certain that Ford's dividend is secure.

Ford also said it anticipates a fourth-quarter loss and more job cuts in 1991.

Meanwhile, GM, whose top executives predicted a drop in sales next year of 700,000 cars and trucks, saw shares drop 3/8 to 35 1/4.

Digital Equipment Corp. rebounded 2 3/8 to 57, after the company announced it would resort to layoffs, the first in the company's 33-year history, if voluntary retirements did not meet the company's cost-cutting goals of about $1 billion.

Digital also announced a restructuring of part of its senior management.

Meanwhile, Data General added 1/4, closing at 5 1/2 after CEO and co-founder Edson DeCastro announced he would retire at the end of the year.

Occidental Petroleum Corp. fell 1 7/8 to 20 3/4 on heavy volume of more than 3 million composite shares, giving back the 1 7/8 gain posted on Tuesday following the death of founder Armand Hammer.

The NYSE halted trading in NCR Corp. late in the day, after reports that the company found a "white knight" defender in its battle against acquisition by American Telephone & Telegraph Co.

NCR later said that a number of companies have in the past expressed interest in NCR, but it reiterated that it was not for sale.

NCR closed down 3/8 at 89 1/2.

Nike gained 1 7/8 to close at 37 1/2 after predicting that profits would rise next quarter.

The Dow transports closed up 10.12 at 915.29, while the utilities rose 1.26 to 210.33.

Broad stock indexes all closed higher, with the Standard & Poor's 500 up 3.75 at 330.19, the NYSE Composite up 1.83 at 180.25, the Value Line up 1.80 at 240.82, the Amex Market Value up 1.26 at 210.33 and the Nasdaq Composite up 2.43 at 370.42.