Whither the market - whither interest rates?

Which way is the stock market going? Most analysts respond to that question with another: Which way are interest rates going?

Stocks, most agree, are in a 15-month-old bull market. Since July the market has experienced a downward ''correction'' (few analysts believe the bull is actually finished).

Last Wednesday it was off on a 17-point rally. Was that the end of the correction or simply an aberration?

That depends on interest rates. The market is driven as much by hunches about changes in interest rates as by those actual changes when they come.

This was apparent again last week. Investors and their advisers had been concerned that federal government borrowing needs were going to be logjammed, because of Congress's debate over raising the government's debt ceiling. This would cause higher year-end interest rates, they theorized. Consequently, the market was desultory early in the week.

But instead of increasing, interest rates on government borrowings began to drop slightly; Bankers Trust lowered its broker loan rate. With the 17-point Nov. 9 rally, and the 14-point advance Friday, the Dow Jones finished the week at 1,250.20, up 31.91 points.

''That rally was based on the premise that interest rates are coming down,'' says Prudential-Bache market strategist Hildegard Zagorski. ''Before that everyone had expected a logjam (of government borrowing) to raise interest rates. We think that rally was based on false hopes.''

Interest rates - or the perception of what interest rates are doing - are the overriding concern of this market, a number of analysts note. Although the rates are not the only reason for significant turns in the market, they seem to serve as the proximate cause.

In the fall of 1982, the stock market entered an episode of sustained growth, fostered, economists and market analysts say, by a belief that interest rates were going to decline. But welling up behind that perception was a tide of thinking among investors that the economy was turning around and stocks were a good buy.

By last spring analysts began to expect a stock market ''correction'' because of higher interest rates. Rates rose - but only slightly and only once - and the market did indeed enter its correction. But behind that perception was also a consensus that speculative stocks were fundamentally overvalued.

''We are still very much in that correction, and it's been nasty and significant,'' says Alan D. Schwartz, research director at Bear, Stearns & Co. Occasional rallies, based on signs of economic strength, ''are not sustainable, '' he says, because interest rates are a damper on the economy.

Most analysts are divided on that subject. Over the long run, many still think, interest rates are going to decline. Over the short term, they are not so sure. Thus every microscopic movement in interest rate indicators is scrutinized.

Robert E. Walsh, research director of Houston's Rotan Mosle, however, believes market analysts err by getting too close to the daily movements of the market and of interest-rate indicators. To him, the keys to the market are more empirical.

For a rally, he looks for New York Stock Exchange trading volume to reach the 90 to 100 million range, instead of its current average of 79 million. He looks for more up trading days: Of the past 28 sessions, 18 have been down. He looks for a stronger bond market. And he watches for the number of new highs per day to exceed the current average of 30.

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