Investors yesterday snapped up shares of technology stocks in a pre-Christmas rally that temporarily sent the Nasdaq composite index soaring above 4000 and pushed the Dow Jones industrial average to a record close.

The vibrant U.S. economy and buoyant stocks also helped push up markets around the world, with growing expectations that foreign companies will see more demand from U.S. customers.

"Santa Claus came to Wall Street," exulted Marshall Acuff, chief market strategist at Salomon Smith Barney.

The Dow jumped 202.16, or 1.8 percent, to 11,405.76, led by Hewlett-Packard, Johnson & Johnson, American Express and United Technologies. The Standard & Poor's 500-stock index rose 22.21, or 1.6 percent, to close at 1458.34--also a record high.

The Nasdaq composite index briefly hit 4000 for the first time in its 28-year history, just 36 sessions after it crossed the 3000 threshold. The Nasdaq closed up 32.14, or 0.8 percent, to a record 3969.44, marking its longest streak of weekly gains in more than 10 years. Nextel Communications and Dell Computer helped lead the advance.

These records were set, however, in relatively light trading, which is a hallmark of a "Santa Claus rally." More than 728 million shares were traded on the New York Stock Exchange yesterday, about 20 percent less than average.

In the waning days of the year, cash comes flowing into the markets from year-end bonuses and fund managers begin frantically snatching up hot stocks (and dumping losers) before their books close on Dec. 31 to make their portfolios look good, a practice known as "window dressing."

At the same time, many traders and portfolio managers are off on vacation, leaving lots of buyers and few sellers. Indeed, since 1989, U.S. stock markets have gained on eight of the 11 trading sessions before the Christmas holiday.

Still, the move into record territory marks another milestone in the Nasdaq's phenomenal rise this year, as investors couldn't stop buying the technology stocks that are largely traded there. The Nasdaq index is up 81 percent this year, a near record-breaking achievement.

The last time a major index rose that much was in 1915, when the Dow Jones industrial average finished the year up 82 percent, according to Alan Skrainka, chief strategist of Edward D. Jones, a St. Louis brokerage firm.

Andrew W. Brooks, vice president of T. Rowe Price of Baltimore, said there was a broadening of the market, with many major sectors gaining. Advancing stocks outnumbered declining ones on both the Nasdaq and NYSE.

In local stocks, Celera Genomics of Rockville led a surge in the biotech sector, rising about 30 percent to close at $144. Orbital Sciences of Fairfax jumped 23 percent to close at $15.93 3/4 after NASA chose the company's Pegasus rockets to launch two satellites. Snyder Communications of Bethesda rose 20 percent, closing at $19, after the company authorized an investment firm to evaluate possible merger offers.

The one sector that did not do well was Internet stocks--which have leaped sharply in advance of the holiday buying season--but some analysts said that was a welcome pause from a heated run-up in prices.

In London, stocks soared, pushing the FT-SE 100 index to a record. In Canada, the stock index rose to a sixth straight record. Japanese markets were closed for Emperor Akihito's birthday. But the Singapore stock market closed at a record high, on bets that a rally by U.S. electronics companies will lead to more orders from Singapore manufacturers. Markets in Taiwan, Hong Kong, South Korea and Mexico also rose on similar expectations.

In addition, Alfred Goldman, chief market strategist of A.G. Edwards Inc. of St. Louis, said he thinks there is a more critical force behind this rally. "We're facing an exciting new millennium . . . we're facing e-commerce and the Internet, which is bringing a second Industrial Revolution," he said, adding that people are optimistic about this new economy and thus are investing.

But James Manfredonia, managing director of Merrill Lynch, is skeptical about the frenzied surge. "It will be an interesting January, one of the most fascinating ones in a decade," he said. He suspects a lot of the recent rise is window dressing and thus expects stocks might be sold off in January.

"It will be interesting to see what comes off the table," Manfredonia said. "There could be a healthy round of profit-taking."

Staff writer Ianthe Jeanne Dugan in New York contributed to this report.

Holiday Cheer

The Dow, Nasdaq and S&P 500 index all posted substantial gains yesterday.

Percent change, Wednesday- yesterday

Dow 1.8%

S&P 500 1.6%

Nasdaq 0.8%

SOURCE: Bloomberg News