It was the week the new American Telephone & Telegraph Company stock hit the market. At least initially, interest in AT&T and its spinoff companies pushed the market strongly ahead.
But, as with almost all phenomena on Wall Street, the emergence of AT&T stock had been discounted in advanced. And by midweek, despite reams of newsprint spent analyzing the stock, trading in ''when issued'' shares of AT&T was old hat.
The strength of the market last week, therefore, could not simply be attributed to AT&T. Most observers agree that AT&T helped, but a genuine year-end rally seemed to have begun - and might have done so even without all the activity in AT&T.
''The market was stimulated to some degree by the old and new AT&T and the new fledglings,'' said L. Howard Nichol of Advest, a Hartford, Conn., brokerage. ''But there is more to it than than.''
''I consider AT&T something of an anomaly,'' said Robert J. Wibblesman, a portfolio strategist at Cantor, Fitzgerald & Co., in Beverly Hills, Calif. Other conditions are influencing the market more, he added.
Still, interest in the old and new AT&T led the market to short-term highs in volume. The new AT&T was the most-traded stock, followed by the old AT&T. Although AT&T and the regional companies initially spurted ahead, by late in the week profit taking crept in.
As for the actual value of AT&T and its spinoffs, that was an open question. A degree of skepticism seemed evident. Dean Witter Reynolds research director Lee H. Idleman recently lowered the rating on AT&T and advised clients that while they should not actually sell their stock, ''investors seeking more price stability, growth potential, and earnings predictability than AT&T offers might wish to consider alternatives.''
Meanwhile, technical confirmation of the year-end rally appeared to come Nov. 22 when the Dow Jones transportation index closed at a record 612.57. Under Dow theory, strength in the industrial sector must be matched by strength in the transportation sector, since in a healthy economy the means of delivering goods must match the production of those goods.
But despite traditional strength in the holiday-season stock market, a handful of crosscurrents keeps some Wall Street-watchers from all-out enthusiasm.
Mr. Wibblesman at Cantor, Fitzgerald notes that the tradition of a year-end rally needs close examination. Not all stocks improve, and in fact many not-so-good stocks benefit. Tax selling by portfolio managers can tend to take the wind out of stocks that had been doing well just before the rally. Moreover, he contends, many institutional investors spend the end of the year trying to guess where next year's growth will be.
As he puts it: ''The mavens in the oak-paneled offices try to divine the leaders for next year, and the punch line is, they sell the stronger stocks and dig up new leaders.'' Often, notes Wibblesman, these decisions are ill conceived , and the result is that a lot of ''junk stocks'' do well.
But even with preholiday profit taking, most observers said last week's stock market rally was likely to continue. The Dow Jones industrial average closed Friday at 1,277.44, up 26.42 points for the week.
Mr. Nichol, research vice-president of Advest, notes that investors' interest in second-tier stocks has been reawakened in the past few weeks.
''There's been a change in character of the market,'' Mr. Nichol says. ''Money managers over the past few months have been straightening out portfolios and taking big profits. Now they are moving into equities with good values.''
Even though institutional investors have been keen on the bond market of late (because of a belief that interest rates are going to remain stable), Nichol observes that few investors are actually expecting bond yields to increase - at least not until early next year. Only if interest rates drop should bonds become more attractive, he says. He says says equities should be strong through the end of December.
But not all equities. The recent correction has soured many investors on high-tech stocks (computers, electronics, biotech). Uncertainty about the actual unfolding of this economic recovery has kept traditional cyclical stocks (steel, heavy machinery) from moving ahead as they normally do.
Nichol thinks investors and their advisers are much more sober about the market at year-end 1983 than at year-end 1982. The focus today, he says, is on corporate earnings. Among the companies Advest sees as good buys due to strong earnings growth are IBM, Owens-Illinois, and Goodyear Tire.
Mr. Wibblesman believes cyclical stocks will, in fact, receive the most attention in the next few months: ''The recovery is a fact, even if capital equipment lags.''
He, too, notes renewed interest in smaller growth companies following the correction. But he thinks a fairly wild swing among investors has taken place, taking the market's lower-capitalization stocks from an ''oversold'' position during the correction to an ''overbought'' position in the past few weeks. Consequently, he thinks there might be some ''sloppiness'' in the market.
Still, even if the market is ''overbought,'' Wibblesman says, that is a fairly recent development, and buying can run on for some time before this shakes up the rally.
The rally was helped, early in the week at least, by continued good economic news. The federal funds rate, which strongly influences other interest rates, dropped. Consumer-price figures indicated inflation was remaining under control. These reports were later tempered by news that sales of new American autos in October had fallen unexpectedly. By midweek the fed funds rate, which fluctuates daily, inched back.
Overall volume on the New York Stock Exchange Nov. 22 amounted to 117.5 million shares, the most in six weeks. Even during a preholiday profit-taking session Nov. 23 more than 108 million shares changed hands. Several weeks ago, when the market was still experiencing the doldrums of a 41/2-month ''correction ,'' analysts had noted that high volume levels were needed on a consistent basis to produce a rally.
Even so, current volume levels are far from the peaks achieved in late 1982 of nearly 150 million shares.