Stocks wander -- but avoid seasonal 'massacre'

Investor uncertainty over a possible new OPEC oil price increase, mixed signals on the outlook for inflation and recession, and the specter of credit tightening by the Federal Reserve Board combined to send the stock market into a confused week.

The Dow Jones industrial average finished down 4.44 points, closing at 936.52 , while the broader New York Stock Exchange composite index ended slightly up, by 0.52 percent, at 72.65.

Still, the very lack of clear direction in the market for the week -- triggering widespread caution -- was seen by some analysts as not altogether inauspicious. Many recall the September-October market "massacres" of 1978 and 1979. In both years the market dropped over 100 points during those months.

Thus, a modest market drop -- coming against an uncertain political and economic climate -- is seen as reflecting investor caution rather than anything more serious. Trading was active throughout the week.

For the long haul, looking down the calendar past the November election and well into the decade of the 1980s, many analysts are still saying that equities look better than ever. "I do believe that this is an attractive time to invest in the equities market," says Joseph Pecoraro, investment manager for the Hamilton Growth Fund, a mutual fund investing in growth-oriented issues.

Like many other analysts, Mr. Pecoraro points out that the market will likely have some significant ups and downs over the next several years. But for the long haul, since stocks are selling at a generally low relationship to profits and dividends, he considers the long-range outlook promising.

During the past week, for example, high-technology, electronic, and machinery issues were among the more actively traded issues. It is this type of growth stock, many analysts predict, that could do well over the long haul.

The market, in part because of the presidential election, and in part because of concerns about a possible new oil price increase, has shown volatility of late, says George Mateyo, executive vice-president and chief investment officer of the Mutual of Omaha Growth Fund Inc. He says caution is probably the name of the game for most investors now. But the long-range outlook for equities looks "promising," he adds.

Besides the likely increase in oil prices by the Organization of Petroleum Exporting Countries (along with production constraints), the upward movement in interest rates is clearly adding a negative tug to the market. Citibank raised its prime rate to 12 1/4 percent from 12 percent late last week, followed by most other major US banks.

But whether the rise in rates will be followed by new credit tightening steps by the Fed is in question. Federal Reserve chairman Paul A. Volcker spoke out against the administration's tax-cut plan for next year -- an action he maintains would only fuel inflation. Also, the Fed reported last Friday that the money supply grew by a hefty $1.2 billion for the week ending Sept. 3.

During the past three months the annual growth in the money supply has been averaging out at 12.3 percent. The target range for the Federal Reserve is 7 percent. That, to some analysts, implies that the system will have to tighten money further to get its growth back on target.

All the same -- or perhaps in part because of that rapid money growth -- the recession finally appears to be easing. In fact, the top Commerce Department economist, Courtenay M. Slater, said Friday that the recession probably hit bottom in August. she predicts modest growth -- adjusted for inflation -- in the current quarter.

If so, it is felt here that would surely help ward off any resurgence of the "September-October massacres" -- as well as ease investor caution about the long-range outlook for equities.