New Investors Rewarded by Stocks, Bonds : Markets: Those who pulled their money out of low-yielding bank accounts received decent first-half returns.

Decent first-half returns on stocks and bonds rewarded new investors who flooded those markets over the last year, many of them coming out of low-yielding bank accounts.

The Dow Jones industrial average, which ended the first half of 1993 on Wednesday at 3,516.08, gained 2.4% in the second quarter and was up 6.5% for the half, from 3,301.11 at year’s end.

The Dow rose 4.2% last year.

Broader stock indexes were off slightly in the second quarter but still were up 3.4% to 4.9% for the half, measuring price alone (not including dividends).

In the bond market, meanwhile, the slide in long-term interest rates to 20- to 30-year lows in recent weeks boosted the value of existing bonds. The combination of interest earnings and price appreciation produced a first-half “total return” of more than 6% for the average bond mutual fund, according to Lipper Analytical Services in Summit, N.J.

In contrast to stock and bond market returns, investors who left their cash in money market funds earned 1.3% in the first six months, or half the funds’ average annualized yield of about 2.6%, as calculated by IBC/Donoghue Inc. of Ashland, Mass.

Wall Street bears, watching the hundreds of billions of dollars that have left the safety of banks for stocks and bonds over the last few years, have warned that many of the freshman investors were courting danger by buying into overpriced markets.

However, despite near-constant first-half worries about the economy, inflation, interest rates and Clinton Administration policies, stocks and bonds still advanced.

“U.S. stocks are still locked in an uptrend,” said Doug Fabian of investment adviser Telephone Switch Newsletter in Huntington Beach. But given the 32-month duration of this bull market--old by bull standards--”I think we’re living on borrowed time,” Fabian conceded.

Many market pros believe that any significant rise in short-term interest rates--now near 30-year lows--would quickly send the stock market down 5% to 10%. In recent weeks, the Federal Reserve has hinted that it might be compelled to raise short rates for the first time since 1989, if economic growth and inflation pick up later this year.

But surprising weakness in a batch of economic reports over the last week appeared to dash the threat of a Fed credit tightening. At the same time, however, stocks have slipped on fears that the economy might be headed back into recession.

The Dow reached its all-time high of 3,554.83 on May 27.

The major stock market trend of the first half was the continued decline of many consumer growth stocks, such as drug and food issues, as those companies have lost pricing power in a sluggish global economy.

In place of the consumer stocks, investors have clamored to own industrial, auto and even defense issues whose businesses are thought to be emerging from a long dry spell. Individuals and companies appear willing to spend money on equipment--to boost productivity--even as large corporate layoffs continue.

The split in the market is illustrated by separate indexes that track major growth and industrial stock groups:

* The Russell 1000 “value” index, which includes many industrial giants, is up 11.1% so far this year, Frank Russell Co. reports.

* The Russell 1000 growth index, in contrast, is down 3.4% this year.

Another market trend that has continued from 1992: Smaller stocks are outpacing most bigger stocks in price.

The Russell 2000 index of small-company issues gained 5.58% for the half, topping the 3.4% rise in the Standard & Poor’s 500 index of mostly blue-chip issues. Another small-stock proxy, the NASDAQ composite index, gained 4.0% in the half.

Wall Street: Mixed Quarter, Good Half

Stock indexes were mixed in the second quarter ended Wednesday, but for the year-to-date, all major indexes are higher.

AMEX market value

2nd Quarter: +2.6%

First Half: +8.8%

Dow industrials

2nd Quarter: +2.4%

First Half: +6.5%

S&P; mid cap

2nd Quarter: +2.1%

First Half: +4.9%

NASDAQ composite

2nd Quarter: +2.0%

First Half: +4.0%

NYSE composite

2nd Quarter: -0.1%

First Half: +3.7%

S&P; 500

2nd Quarter: -0.3%

First Half: +3.4%

Source: Reuters