Skittishness rules Wall Street. Besides socking many investors with deep financial losses the past month, the stock market tumble has soured many investors on stocks, sending them to hold straight cash or equivalents, or bonds. Although the market, as measured by the Dow Jones industrial average, has found some footing at the 1,140-50 level, few analysts expect a quick or sustained rally. The reason: Too many investors have been burned recently. Economic news would have to become surprisingly positive to cause a surge in buying again.
''Technical analysts'' - that is, those who watch the movement of market indicators and their relationship to economic signals and overall investor ''sentiment'' - continue to advise caution. Analyzing stocks on a fundamental basis may be the better route to follow, they say. This means: Look at stocks as long-term investments and examine them in light of their earnings potential and their current (perhaps attractive) price.
''It's a market today for a careful investor,'' says E.F. Hutton's chief technician, Newton Zinder, ''not the trader.''
Mr. Zinder notes that despite the market's apparent leveling off in the mid-1 ,100s, ''not all stocks are going to make their lows at the same time.'' Technically, he says, the market does appear ''quite oversold and might bounce back, but we haven't seen any real rally, and the Dow needs back-to-back rally days to advance.'' Even if there is a rally, he says, it is likely to be ''brief , measured, lasting no more than a week or so.''
Eric Miller, chief investment officer of Donaldson, Lufkin & Jenrette, agrees that caution is necessary and that buying for the long-term ''total return'' is probably the best strategy. Unfortunately, part of the equation of ''total return'' is price appreciation (the other half is dividend). If the market were to slip further, even modest hopes for price appreciation of a stock might not be realized.
''A good bottom could come about quickly,'' Mr. Miller says, ''perhaps almost momentarily, but we would not relax an overall posture of some caution until the washout appeared to be more final or until the number of unusual values among stocks with bright potential appeared to be irresistible.''
Among industry groups that some cautious investors might try, Zinder recommends health-care and drug issues, retail outlets, and big banks. Miller suggests low-tech growth stocks, consumer nondurables, some health care, and some media-oriented stocks.
The ambiguous economic environment in which the Wall Street skid occurred has changed little in the past month. Fodder to concern economists and investors abounds: interest rates and their assumed link to the federal budget deficit; the United States trade imbalance; the possible renewal of inflation; instability in the Middle East (especially in the Iran-Iraq war with its threat to oil supplies); disappointing corporate earnings.
It should be noted, however, that none of the above mentioned problems are actually concretely bad news. Most of those problems, in fact, have yet to surface. Interest rates remain where they have been since last summer. The trade imbalance will perhaps ameliorate as the economies in Europe, the Far East, and the third world improve. Inflation is still at a 10-year low. And the Middle East is riddled with crises, but those are usually contained.
Economic reports last week indicated the economy is growing at a faster pace than in 1983's fourth quarter and is in no danger of slipping into a recession. Housing starts surged in January; factories operated at higher capacity and produced more goods; personal income rose, as did retail sales and consumer credit.
Still, none of that is uniformly good news to anxious investors, so the market appears likely to remain relatively flat. The DJIA finished Friday at 1, 148.87, down 6.07 points for the day and 11.83 for the week. (Markets were closed Monday.) That was not so severe a drop as the respective weekly declines of 29.11, 32.97, and 36.33 points in the market the previous three weeks.
Assets of money market mutual funds have been on the rise the past six weeks and are now at their highest level since June. That was evidence that stocks face stiff competition. Moody's Bond Survey attributes this to weakened price inflation and a manageable flow of new debt:
''Recent sharp declines in equity prices even as many major corporations reported dramatically improved earnings suggest that some funds may be finding their way into fixed-income investments purchased as high-yielding alternatives to stocks.''
Ronald A. Glantz, chief investment officer of Paine Webber Mitchell Hutchins Inc., notes that ''a strong stock recovery requires lower interest rates, a change in investor perception on the economy (toward a longer economic cycle), or better-than-expected earnings.''
Interest rates, Mr. Glantz says, will probably not go lower in the near term, and the economy probably will not send out signals universally interepreted as good. As for earnings: ''The key question isn't 1984 earnings,'' he says, ''it's 1985, 1986, and 1987 earnings. To have stocks outperform bonds by enough to make it worth the additional risk, investors have to be convinced that the economic recovery will last five years. And that requires the [federal budget] deficit be slashed.''