Bulls in a tailspin didn't amuse Wall Street

You've heard of G-forces? Fighter jet pilots succumb to this body-flattening phenomenon in a sharp turn. In ``Spies Like Us,'' Dan Aykroyd and Chevy Chase do a spoof on the effects of G-forces -- emerging from a whirling gravity simulator with faces squashed as if they just hit a brick wall. But investors weren't amused last week when Wall Street proved (once again) it too can produce contorted features with hairpin turns.

Early in the week, the Dow Jones industrial average gleefully soared to a record 1,565.71, only to have its wings clipped on Wednesday: The Dow plunged a record 39.1 points. A remarkable 2.5-percent loss, but not nearly as great as the 12.8-percent, 38-point one-day decline in 1929.

The drop was triggered by a Labor Department report of a jump in new jobs, which indicated a peppier-than-expected economy. The Federal Reserve Board will not have to push interest rates lower to stimulate business, analysts concluded. That prompted some economists (including Henry Kaufman at Salomon Brothers) to say interest rates would not drop any more. This abrupt shift in thinking sent the bond market into a tailspin, too.

In two days, prices on long-term bonds tumbled more than $30 for every $1,000 in face value. Yields on 30-year Treasury bonds climbed to about 9.5 percent.

The climbing bond yields helped sour investors on stocks, especially interest-sensitive issues that had been favorites for months. The Fed's adoption of a curb on ``junk bond'' financing last week also concerned investors. Junk bonds are frequently used in the large takeovers that helped fuel the rally in 1985. And computer-guided arbitrage trading -- capitalizing on the price differential between options and futures contracts on major stock indexes and the prices of the underlying stocks -- exacerbated the 39-point fall last week. Some analysts say that without the arbitrage sell-off, the market would have fallen only 10 or 15 points.

Nonetheless, the week's events shook the confidence of many investors. By Friday's closing bell the Dow industrials had given up 35.67 points in five trading sessions, finishing at 1,513.53.

Peering into their charts, some technical analysts expect the market to be choppy as investors seek a fresh read on the economic crosscurrents.

``The market's a bit emotional right here,'' says Eugene E. Peroni Jr., director of technical research at Bateman Eichler, Hill Richards in Los Angeles. ``I expect investors to be more excited by and reactive to daily monetary events and economic news. That will cause abrupt and expensive trading swings, very whipsaw-type behavior.''

But Mr. Peroni doesn't see a collapse. He notes that bellwether IBM has held up well despite the broad stock and bond market declines. During the next month or two he sees the market settling down into the 1,460-to-1,480 range on the Dow.

That's a bit too bearish near term for Ralph Acampora, chief technical analyst at Kidder, Peabody & Co., and Gene Jay Seagle at Herzfeld & Stern.

``Are we headed for a major decline? No. Maybe a short-term loss of momentum keeping us in the 1,500-to-1,550 range,'' says Mr. Acampora. A month from now he looks for a new Dow high: ``We'll see in the next big rally if the market has enough guts to reestablish its momentum.'' He expects the Dow to hit ``1,650 or 1,700'' by June, then drop 15 to 20 percent. Late in the year he sees a rally bringing the market back to the 1,500s.

Similarly, Mr. Seagle at Herzfeld predicts a low of 1,500 near term, a high of ``1,700 by March,'' followed by ``a pretty good correction to about 1,450.'' By year-end, he believes the Dow will rebound to ``around 1,700 or moving toward it.''

And the less-sanguine Peroni believes the market will top out at 1,620 or 1,650, then slide to 1,400 or slightly lower, in the second half of 1986. His contrariness extends into stock selection -- he likes oil stocks. Peroni realizes OPEC is splintered and oil prices could collapse. And he concedes it's difficult to justify on a fundamental basis. But technically, ``they've shown surprisingly good signs of stabilization and recovery. Later this year, I expect them to be significant performers -- perhaps due to problems in the Mideast.''

So if these market technicians are to be believed, last week's plummet is not the end of the Great Bull Market. Rather, it was just a reminder that ``Wall Street is not a one-way, but a two-way, street,'' as Irwin Kellner, chief economist at Manufacturers Hanover Trust, said recently. Interest rates Percent Prime rate 9.50 Discount rate 7.50 Federal funds 7.88 3-mo. Treasury bills 7.20 6-mo. Treasury bills 7.32 7-yr. Treasury notes 9.20* 30-yr. Treasury bonds 9.52* *Yields; Source, Bank of Boston