The Dow Jones industrials closed just shy of 5,000 Friday, but still rose to a record high for the seventh time in eight sessions.

The Dow average climbed 20.59 to 4,989.95, easily topping Thursday's record and pushing past a 30 percent gain for 1995. It's the 60th record close in the Dow average for the year, the first time that's happened in the 20th century.The closely watched blue-chip average got as high as the 4,996 level in intraday trading as investors brushed aside the continued budget fight in Washington and bet instead that interest rates would soon be lowered.

Advancing issues edged out declines by 6 to 5 on the New York Stock Exchange. Volume was heavy at 430.6 million shares as of 4 p.m., up from 418.43 million on Thursday.

Broad-market indexes also rose. The NYSE composite and the Standard & Poor's 500 composite logged record highs for the third consecutive session. The NYSE composite rose 1.64 to 320.12. The Standard & Poor's 500 rose 2.73 to 600.07, its first close above 600.

The Nasdaq composite index rose 0.55 to 1,045.03. The American Stock Exchange's market value index rose 2.50 to 531.96.

There was a powerful upward bias to the trading all day, fueled by the market's currrent momentum and the continued flow of cash into stock mutual funds, which has dipped a little but is still positive, said Eric Miller, Donaldson, Lufkin & Jenrette's market strategist.

"There is a perceived demand by most fund investors that they have to stay fully invested" in order to participate in the market's gains. "They can't build cash, and if they sell something they have to buy something else."

Investors shed some speculative issues, in part because of nervousness about the Washington budget standoff, which was far from resolved by the close of trading Friday.

The House adopted the sweeping Republican plan for balancing the budget and cutting taxes. But President Clinton has promised to veto it, along with an emergency funding bill passed by the full legislature on Thursday that would reopen closed federal agencies only if Clinton agreed to balance the budget in seven years.

Uncertain how the budget fight would shake out, investors sold the more speculative issues in their portfolio. Technology issues, for example, were sold aggressively, with IBM losing 1/2 to 951/8; Micron Technology down 1/8 to 551/8; Intel off 1/8 at 625/8; and Microsoft down 21/2 to 873/8.

Hewlett-Packard slid 43/4 to 881/2 after the computer maker said that while its fourth-quarter profit had jumped 42 percent, higher expenses are squeezing profit margins.

But investors quickly replaced technology shares with blue-chip stocks, which are perceived as better able to weather an economic or political storm.

"Money is going into defensive issues that do not necessarily react," said Don Hays, director of investment strategy at Wheat First Butcher Singer Inc. in Richmond, Va.

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The Dow industrials were led higher by such consumer stocks as Procter & Gamble, up 11/8 to 89; and Disney, up 11/2 to 591/4. Oil stocks that often move counter to the economy were higher as well, with Exxon gaining 11/2 to 793/8 and Texaco adding 11/8 to 71.

Stocks began climbing early in the session and steadily added to their gains all day, ignoring a dip in bonds and a mixed dollar. Some stock traders and analysts had expected a more volatile session, given the double expiration Friday of options and futures contracts. But the "double witching" factor did not seem to influence trading much.

The real test of the market's strength, traders said, will come next week, when the technical bias of the expiration is not an issue.

In overseas trading, the Nikkei index in Tokyo rose 1.18 percent, but the DAX index in Frankfurt and the FT-SE 100 in London both eased.

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