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Market fazed but not dizzied by bad news

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The stock market last week had to endure: * Rising interest rates, tightening credit, and dismal performance in the bond market.

* The resignation of White House economist Martin Feldstein, and growing Reagan administration criticism of Federal Reserve policy.

* Troubling corporate news and mixed economic news.

Most of that could do the market no good. After a valiant start on the week - including a 9.74-point rise the day the prime was boosted - the Dow Jones industrial average closed the week off 8.17 points at 1,157.14. Friday was a particularly bad day, with the Dow dropping 10.05 points.

The biggest pieces of economic news last week were the prime rate, which jumped to 121/2 percent; the Reagan administration's subsequent attack on Federal Reserve monetary policy; and the resignation of Feldstein (due both to his longstanding policy dispute with others in the administration and his desire to resume teaching at Harvard.)

Many economists expect another prime-rate increase in the near future; the bond market performed poorly as a result. Although some analysts contend a slowdown in the economy is inevitable, last week's large rise in the money supply ($2.4 billion), plus the rebounding of retail sales in April, suggested the day had not yet arrived. Still, the steadiness of the producer price index (see box) indicated that inflation has not really accelerated, either.

Troubling news for both AT&T and Continental Illinois Corporation probably hurt the market more than interest rates did. The Federal Communications Commission ordered AT&T to cut long-distance telephone rates by 6.1 percent and suggested that the company deliberately misstated its prospective income. Continental Illinois has been hit by reports that it is in financial straits.

In such a hot-and-cold economic environment some analysts are surprised that the market is holding up as well as it is.

''The stock market's sort of like Rocky in 'Rocky III,' '' says Philip B. Erlanger, chief technical analyst at the Advest brokerage firm in Hartford, Conn. ''It keeps getting hit, and it's still in there fighting.''

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