Markets bob in Whitewater rapids

THE political storm known as Whitewater is evoking unpleasant memories on Wall Street of the rocky times the stock and bond markets went through during the Watergate scandal two decades ago. But many analysts say the current controversy need not have pervasive or long-lasting financial effects. They also say the United States economy appears in much better shape than it was in the Watergate years of 1973 and 1974.

Stock and bond prices have been erratic recently; some analysts attribute this to concern about the Whitewater case, growing out of an old Arkansas real estate deal in which the president and his wife invested. ``The muddy political water and the partisan wrangling in Congress won't help financial markets,'' says Sung Won Sohn, an economist at Norwest Corp. in Minneapolis.

But many observers say the situation looks like an excuse for an overdue market correction, rather than any cause for alarm over the banking and credit outlook. ``We think the markets clearly overreacted to a perceived political crisis,'' says Thomas Gallagher, political analyst at Lehman Brothers.