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STOCKS ADVANCE IN LATE TRADE

Stocks were holding solid gains this afternoon in quiet trading before Tuesday's Federal Reserve meeting on inflation and interest rates.

At 3 p.m. the Dow Jones Industrial Average was up 64.83 at 7,987.01 after recovering from an early 28-point deficit.

Broader stock indicators also shrugged off some early weakness despite an increase in interest rates in the bond market. Smaller-company shares were working on new highs again after a three-session pause in their record-setting march.

The Dow's strongest components were Alcoa, up 1 1 3/1 6 at 82 1/8 ; IBM, up 1 3/8 at 104; and Chevron, up 1 3/1 6 at 84 1/4 .

Aetna Inc. tumbled after the company said its third-quarter earnings will fall below Wall Street projections because of higher-than-expected medical costs. The news sent Aetna stock down 9 1/8 to 81 3/8 a share on the New York Stock Exchange.

Advancing issues outnumbered decliners by a 6-to-5 margin on the New York Stock Exchange, where volume was down slightly from Friday's pace.

The Standard & Poor's 500 list was up 7.39 at 952.61, the NYSE composite index was up 3.55 at 498.75, and the Nasdaq composite index was up 9.19 at 1,691.43.

The Russell 2000 index of smaller companies was up 1.62 at 450.50, about a point better than last Tuesday's record close of 449.42. The Russell 2000 had closed at record highs for eight straight sessions before slumping on Wednesday and Thursday.

The American Stock Exchange composite index was up 3.02 at 692.86, working on a record high for the first time in a week.

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