With interest-rate debate still looming, will bulls or bears prevail?

NEW YORK -- The Federal Reserve's modest boost to interest rates this past week surprised no one on Wall Street.

But market watchers are divided on what the quarter-percentage point increase announced Wednesday means for investors. Was the Fed's latest move part of a plan to engineer a ''soft landing'' for the high-flying U.S. economy? Or will it put an end to the bull market that is now in its 10th year?

Conventional wisdom holds that higher interest rates are bad for stocks. But in 1999, investors shook off three separate rate increases to send stocks to record levels by the end of the year. That extraordinary resilience is forcing many market analysts to reconsider the way rising interest rates will affect the market in 2000.

''The market may have already seen its high point for this year,'' said A. Marshall Acuff Jr., equity strategist at Salomon Smith Barney. ''The market knows that the Fed is in a gradual tightening mode, and as long as that's in place, it will be hard to advance significantly.''

But with investors still pouring money into mutual funds and enthusiasm for selected stocks still running high, ''it's not necessary for the market to fall apart, either,'' Acuff said.

The Fed began raising interest rates last June, reversing a trio of interest rate cuts in 1998 that were aimed at stimulating economic growth as Asian nations struggled to recover from a widespread financial crisis and as Russia's economy foundered.

With every passing rate hike, however, U.S. economic growth flourished and the stock market soared. Last year, Fed Chairman Alan Greenspan made no secret of his worries that stocks were overvalued and Americans' expectations were reaching unreasonable levels.

But this year, analysts said, Greenspan and average investors alike appear confident that a series of regular, modest rate increases may slow economic growth just enough to hold off inflation without deflating the optimism that has driven the market higher.

''If the Fed becomes too aggressive, it would kill the stock market, and Greenspan doesn't want to do that,'' Acuff said.

Indeed, money managers appear to be growing more comfortable with the idea that higher interest rates are on the way, said Frank Campanale, president of Salomon Smith Barney's Consulting Group. In the group's recent survey of investment managers, 64 percent said they anticipated that interest rates would rise in 2000.

Yet 58 percent identified themselves as ''bullish'' or ''very bullish'' about the market. Just 11 percent said they were ''bearish,'' and not a single one called himself ''very bearish.'' The others said they were neutral.

''They feel Greenspan is doing a little bit of fine-tuning, without drastic measures,'' Campanale said. ''It shows that he's in control.''

John Shaughnessy, chief investment strategist at Advest Inc., remains strongly bullish, forecasting that the Dow will reach 13,000 by the end of the year. But he believes that stocks may reach their next peak on the strength of a relative handful of stocks.

Technology stocks, with their rapid growth rates and increasing role in the nation's economy, will undoubtedly lead the market again, Shaughnessy said. But any company that can keep its earnings a step ahead of rising rates should perform well, he added.