Bull Market Charges Ahead

THE Dow: Will it soon hit 4,900, 5,000, higher? The bulls are rampaging on Wall Street again, as the stock market continues its relentless pace into high terrain. Despite a slight dip in the market earlier this week, the talk now is that the Dow Jones industrial average, the best-known of all market indicators, might soon hit 4,900 points and then climb to 5,000 points this year or next. ''Underlying economic fundamentals continue to look good,'' says Hildegard Zagorski, an analyst with investment house Prudential Securities Inc. ''The inflation outlook is good, there's slower economic growth,'' and corporate profits ''have been steady.'' Stock measurements also look promising, says David Blitzer, chief economist with Standard & Poor's Corp., a financial services firm. The price-to-earnings ratios for the S&P 500 index, for example, is running around 13 to 14, Mr. Blitzer says, which is on the ''safe side of the norm.'' Historically, the P/E ratio runs between 10 and 20, he says. Corporate earnings have been ''well ahead of expectations.'' If there is a ''warning sign,'' Blitzer says, it is the dividend yield. It is running at 2.4 percent on the S&P 500. That's a ''rotten number,'' he says. Historically, the ratio runs between 3 and 6 percent. One factor that may have pushed the ratio down the past few years is the growing prevalence of technology stocks in indexes, such as the S&P 500. Many technology companies, he notes, do not choose to pay dividends, instead reinvesting profits in the company. This policy weights the overall dividend ratio downward. Although the Dow Jones industrial average was down slightly on Monday and Tuesday, Blitzer says this weakness in the Dow does not suggest a correction ''is yet at hand.'' Some investors are merely taking profits, he says. On Tuesday the 30-stock Dow was down because of selling of one company in the index - Caterpillar. Broader indexes, such as the S&P 500 and the Nasdaq Composite Index, were up that day. The plan to break up AT&T Corp. gave prices a boost Wednesday. For the long term, the current US bull market still looks to be on course, experts say. In addition to favorable economic conditions, there are three other factors believed shoring up the market: * The massive postwar ''baby boom'' generation, apprehensive about the future viability of Social Security and corporate retirement programs, is starting to plow more money into stocks, bonds, and other retirement ventures. * Historically, the year just before a presidential election year tends to be very upbeat for the stock market, as Washington policymakers aim to keep the economy on open-throttle. * US investors have few lucrative alternatives to the stock market, with the bond market often in turbulence and money-market funds paying low returns. In part because of the fast-paced upturn in the market this year, many analysts do not rule out the possibility of a slight downturn. ''A mini-correction could come at any time, but it will probably occur as the Dow gets closer to the 5,000 point level,'' says John Winthrop Wright, chairman of Wright Investors' Service in Bridgeport, Conn. Whenever the correction does come, Mr. Wright says, it will have a more severe impact on ''speculative stocks,'' such as high-technology issues, than on Blue Chip stocks. He says the latter are not especially overpriced. ''When everything looks so good as it does now, then anything could happen,'' in terms of a correction, Ms. Zagorski says. But Ralph Acampora, Prudential's chief statistical analyst, forecasts that the Dow will hit 7,000 points by 1997 or 1998. Last week, the 30-stock Dow and the broader S&P 500 index both soared to new highs, with the Dow surging to 4801.80 points on Sept. 14. RECENT sell-offs of some high-tech stocks ''don't suggest that the momentum of this market has yet been broken,'' says James Stack, who publishes InvesTech, a market newsletter, in Whitefish, Mont. Mr. Stack and other analysts have been skeptical - and uneasy - about the economic underpinnings of the bull market, which Stack reckons is built in part on euphoria. He has been urging his clients to remain very cautious. ''We're seeing a tug-of-war'' on Wall Street right now between some concerns about possible new inflationary pressures, which could push stock prices downward, and the massive investing momentum of recent months, says Greg Nie, a market analyst with Everen Securities Inc. in Chicago. ''But there's still room for the market to continue its gains over the long term.'' Many stock traders would like another cut in interest rates to keep the economy revved up. But most analysts don't expect the Federal Reserve's policymaking committee to trim rates when it meets next week.