MONEY MATTERS: EDGY ANALYSTS CAST ONE EYE TOWARD FED.

Byline: Chet Currier Associated Press 

As impressed as they have been with the stock market's recent rally to new highs, the bears of Wall Street aren't ready to surrender just yet.

The bull market may have prevailed for the moment, despite pressure applied by the Federal Reserve and its chairman, Alan Greenspan, with his oft-voiced concerns about possible excesses of enthusiasm among investors.

But most analysts are betting that the Fed will be heard from again soon - quite possibly on May 20, when the central bank's policy-setting Federal Open Market Committee holds its next scheduled meeting.

The last time it met, in late March, the FOMC opted to nudge short-term interest rates higher in what it portrayed as a pre-emptive strike against inflation.

``Our economics group argues that the Fed will raise rates again on May 20,'' says Charles Clough, chief investment strategist at Merrill Lynch.

Or as Norman Fosback, editor of the financial newsletter Market Logic in Deerfield Beach, Fla., puts it, ``the next Fed action, regardless of timing, is certain to be towards greater restraint and higher interest rates, a factor the market has not yet discounted.

``That is one reason we believe a policy of great caution continues to be warranted.''

Among all the convulsive ups and downs of stock prices so far in 1997, many observers considered the rally between April 11 and May 6 to be the most remarkable show of raw power.

In just 17 trading sessions, the Dow Jones average of 30 industrials soared 833 points, or better than 13 percent, more than recouping the ground it lost in a sell-off over the previous month.

In the latter stages of the rally, a kind of ``panic buying'' swept through many big-name stocks, observed Edward Keely, manager of the $1.2 billion Founders Growth Fund, a Denver-based mutual fund.

``I'm actually an eternal optimist,'' Keely said in an interview this past week. ``So it's an uncomfortable position for me to be as cautious as I am right now. But this market makes me very uncomfortable.

``I think the market is ignoring the historical fact that when the Fed raises interest rates, it's not good for stocks.''

The recent rally drew some impetus from strong earnings reports for the first quarter of the year, as well as economic data that pointed to continuing growth without much present evidence of revived inflation.

``Indicators of the `good' about the economy - things like growth and employment and profits - have rarely looked better,'' says David Resler, chief economist at Nomura Securities International in New York.

But the Fed's concerns are a reminder, in Resler's phrase, that ``every silver lining has its cloud.'' For one thing, he suggests, the recent economic data contained ``hints that growth might indeed be moderating.''

Clough said, ``Over the past year, we've seen too many investors move headlong into U.S. equities at a time when fundamentals have been deteriorating.''

By most measures, stock values are very high, Clough adds, ``and earnings growth may be a fraction of what we've been accustomed to seeing over the past couple of years.''

Clough says that in their global investment strategy, Merrill Lynch analysts have ``our most aggressive commitment ever in favor of non-U.S. markets.''

Keely points out that investors face a real quandary now as they try to follow the old precepts ``don't fight the tape'' and ``don't fight the Fed.''

``Those two maxims are clearly at odds right now,'' he notes.