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When the stock market isn't looking too healthy, there still seems to be no better medicine than a dose of lower interest rates.

Witness the market's behavior in the first few weeks of 1996, when it got off to a shaky start amid worries about the budget deadlock in Washington and slowing growth in the economy and corporate profits.But stock prices resumed their climb to record highs in late January as open-market interest rates dropped and Wall Street began to anticipate a new move by the Federal Reserve to ease credit conditions.

The Fed fulfilled those hopes last week by announcing cuts of a quarter of a percentage point in both the discount rate, the charge it sets on loans to private financial institutions, and the federal funds rate on overnight loans between banks.

Many stock and bond investors think the Fed isn't done yet, after a series of three cautious moves since mid-1995 to nudge short-term interest rates lower.

"The markets are betting that the Fed's 25 basis-point (0.25 of a percentage point) rate cut will be followed by two more similar moves over the next year," said Bob Prince, an analyst at Bridgewater Associates in Wilton, Conn.

A prime reason why stock traders view easing by the Fed so enthusiastically is the signal it sends about the inflation outlook. Each time the Fed pushes short-term rates lower, it effectively expresses increased confidence that inflation is restrained.

In addition, investors appear to be impressed that rates are coming down even though President Clinton and Congress have apparently reached a standoff in their budget negotiations, thereby frustrating hopes for agreement on measures to narrow the federal deficit.

Logically, the widespread signs of softness, if not outright weakness, in economic activity that have encouraged bond traders to push interest rates lower should give stock market participants pause.

After all, says David Schulman, investment strategist at Salomon Brothers, "the probability is increasing that the economy could hover at just above a zero growth rate for much longer than most analysts now expect, and such a scenario ultimately would take its toll on profits."

"Corporate earnings reports during the course of the year will trigger more than a few recession fears," he says.

But stock market investors, including the legions of individuals who operate through mutual funds, evidently have their attention focused on the longer-term downtrend in both inflation and interest rates that dates back to the early 1980s - which was also when the super-bull market in stocks was born.

In those days, each economic cycle would take the yield on long-term Treasury bonds well into double digits at the high. In the 1994 rise of interest rates, by contrast, the yield on the long bond peaked at about 8.25 percent. The way things look now, with the yield at about 6 percent and seemingly still headed down, the next crest could be even lower.

For the immediate future, Wall Streeters are showing little concern over the recession risk that a good many economists say has been rising steadily of late.

If the U.S. economy is headed back to an era of little inflation and sustained low levels of interest rates, stock traders appear convinced that the possibilities are very bullish - bullish enough to override any concerns about the outlook for the next couple of quarters, or maybe even the next couple of years.