DOW'S WILD RIDE; IMPETUS FOR MARKET'S SWING PROVING TO BE ANYBODY'S GUESS.

Byline: Ben Sullivan Daily News Staff Writer

With U.S. stocks Tuesday regaining much of the ground lost the day before, pundits were back on the airwaves and news wires trying to explain where the market is headed and why.

But for a growing number of analysts, economists and armchair investors, the simple truth is they haven't got a clue.

``The dirty little secret on Wall Street is that nobody knows,'' said William Sterling, head of global equities for Credit Suisse Asset Management.

Nobody knew that Wall Street would react to Monday's sell-offs by pushing the Dow Jones industrial average up 288 points, the second-highest point gain in the market's history. And certainly no consensus could be reached Monday afternoon to explain that day's 512-point drop.

The Wall Street Journal and The New York Times said a run on mutual funds by small investors had forced fund companies to sell stocks Monday. Other also-weighty sources said the opposite, that it was mostly institutional investors such as hedge and pension funds that were to blame. With 20/20 hindsight, it appears the latter was closer to the truth.

But given the abundance of theories on what's driving the current market turbulence - from Russian politics, to Asian currencies, to a Monica Lewinsky-distracted federal government - such inconsistency is perhaps to be expected.

``The talk on the street is that this (turbulence) is all about Russia, but for the life of me, I can't figure out what these Internet stocks, for one, have to do with Russia,'' said Tim Loughran, an equity researcher at the University of Iowa.

Loughran and others say the normal news-and-reaction model that in the past has helped move markets up or down has flown out the window in recent months. The day after Japan bombed Pearl Harbor, for example, the Dow dropped 4.4 percent, Loughran said. ``Think about how much the market has changed in the last week and then do a search for news items. Did anything really happen? The answer is no.''

That sort of bewilderment appears to be creeping into investment houses as well. Tuesday, Merrill Lynch's chairman and president sent a joint memo to employees warning that ``selling in the equities markets has reached an emotional stage.''

While offering few predictions, there are those in the quasi-academic world of economic think tanks and consultancy offices who claim to have some insight into what's occurring. But unlike traditional pundits, who often oversimplify complex economic phenomena for a mass audience, these people say their theories are simply too complicated for most people to grasp.

Woody Brock, president of Menlo Park-based Strategic Economic Decisions Inc., said a theory developed by Stanford University researchers that he is now promoting to institutional and government clients explains recent downward lurches in Asian currencies that older economic models failed to anticipate.

The theory, which draws on the ``economics of uncertainty'' and ``neutral correlation phenomenon,'' provides what Brock describes as ``the decisive breakthrough in our ability to understand market volatility of the kind we're witnessing.''

But the very act of speaking about it publicly, Brock said, can affect the theory's dynamics. ``So for anyone arrogant enough to get on TV and pretend they know what's happening, forget it.''

Anyway, ``What is important is not the pundits, but key policy-makers like Bill Clinton and (Deputy Treasury Secretary) Lawrence Summers. They do understand this, or should, and use this information to guide policy,'' he said.

For the rest of us, given the seemingly indiscriminate swings the market is taking, some analysts say it might be best to simply turn off the TV and accept that stocks are in for a bumpy ride in the coming months. Indeed, volatility might be the only given for the remainder of the year.

``My hunch is that for awhile, the next several months at least, we'll be in a trading range of 7,300 to 8,300 points (for the Dow Jones industrial average), and go back and forth, and back and forth,'' said Peter Anderson, chief investment officer at Minneapolis-based American Express Financial Advisors.

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CHART: no caption (Timeline of Tuesday's stock market activity)

Dionisio Munoz/Daily News