Despite strong corporate earnings and continued evidence that the economy is improving, the stock market appears to have entered a rather broad decline. This sort of development had been expected by many securities analysts, who for weeks had described an essentially bullish market as being short on liquidity for future growth.
Consequently, the current stock market ''correction'' was considered necessary so that investors could shift money from securities perceived to be topping out and put that money into issues expected to grow in 1984.
Such a technical maneuver is not without risks, however. Coupled with disturbing international news the past few weeks, with the current federal financing squeeze in Washington - and the attendant increase in interest rates - a slight stock market downturn could become more serious, some analysts maintain. One argues that there is little in today's market to create buying interest, warning that ''there is a danger that profit taking could turn into outright selling and investors could just decide to run for the hills.''
Throughout the past week the market performed sluggishly. On Friday the Dow Jones industrial average closed at 1,218.29, down 5.19 points for the week.
William E. Raftery, an analyst with New York's Smith Barney, Harris Upham, notes that investors are avoiding most industries other than those that are consumer oriented. This, he says, is not unusual. While it reverses a six-month-old trend in which capital-goods stocks outpaced consumer stocks, in the two years before that trend, consumer goods were actually more popular.
Mr. Raftery counsels avoiding any of the heavier capital-goods stocks: aerospace, machine tools, steel, oils, and oil-service equipment. Instead he favors papers, chemicals, electric utilities, household appliance manufacturers, food companies, retailers, and selected airlines.
Because the most widely followed market indexes - the DJIA or the Standard & Poor's 500 - give more weight to bigger industrial stocks, the market, as measured by these indexes, will continue to perform poorly, Raftery says. Internal market signs are not very favorable, he says: ''The greatest weight is to the downside. The correction is going to continue for a while, so we are calling for prudence in the intermediate term.''
At New York's Kidder, Peabody & Co., analyst Ralph J. Acampora notes that ''the disparate trends between blue chip stocks and secondary issues is expected to continue and should not be overlooked.'' He sees the divergence as creating much-needed cash for further market growth in 1984 - and as bringing prices back into line with fundamental values.
One sector, in particular, had prices that appeared to far outstrip fundamental values during late 1982 and early '83: high-tech - especially the securities of small computer manufacturers. Now this sector has been hit hardest in the correction.
Oversaturation of the personal computer market and intense competition - including price cutting - have taken their toll on investors' confidence. For the past four months, despite occasional rallies, high-tech stocks have been on the decline.
''The secondary stocks that we do most of our business in have just been washed out,'' says E. Hunter Thompson Jr., research director of Branch, Cabell & Co., a Richmond, Va., brokerage. Nonetheless, Mr. Thompson contends that the high-tech, emerging growth area has bottomed out, even though most investors have not yet noticed.
''In June,'' he says, ''everybody wanted high-tech, but since July everybody has wanted to switch to big-capitalization stocks. Whenever there is such a broad movement, the opposite is what is really going on. Conventional wisdom historically is wrong.''
Thompson says he believes certain segments of high-tech will continue to have problems commercially. Since that will affect earnings, their stock will perform poorly. Most of the difficulties will occur with computer companies specializing in end-use products. These are facing severe competition.
But those companies that make component parts for computers - or devices that enhance their use - will do well. Thompson mentions as particularly promising Data Switch Corporation, Algorex, KLA, and Network Systems.
''So many of these companies are doing very, very unique things in situations of limited if not nonexistent competition,'' Thompson says. ''They are increasing productivity and affecting vast areas of the economy.''
He and other analysts have noticed that there has been no letup in the number of new stock issues coming onto the market. That is disturbing to them, for many investors sell previous new issues to invest in the newer new issues - and that forces most new-issue stocks into discounts. That, in turn, decreases the corporate-funding ability of common stock and hampers the growth of these new companies.