Waves of emotional stock selling, which battered the values of local corporate stocks as well as national issues earlier this week, subsided yesterday in a relatively quiet day of trading in the Washington area.

But the buying and selling on Tuesday and Wednesday left area stock prices generally at the lowest levels since last June and far below record highs in August.

Investors interviewed at local brokerage offices yesterday showed no sign of panic, although they expressed concern that the Federal Reserve Board's new restrictive monetary policies might not be adequate to deal with overall inflationary pressures.

As measured by Johnston Lemon & Co.'s index of 30 Washington area issues, area stock prices edged higher yesterday for the first time this week -- closing at 106.443 after plummeting 8 percent in the previous three days to 105.722 on Wednesday. The index stood at 114.837 last Friday and had topped 116 last August.

Several major area stocks rose substantially yesterday, with Fairchild Industries up $1.50 a share to $32.25, after receiving portions of a $1 billion subcontract from the Boeing Co. for work on a new-generation 757 jetliner.

Federal National Mortgage Association climbed 50 cents yesterday to $16 a share and was fifth most active on the New York Stock Exchange composite trading list, with a volume of 481,000 shares. Fannie Mae reported lower earnings yesterday, but analysts said the company should benefit somewhat from higher mortgage rates soon.

Of the 30 companies followed by Johnston Lemon for its local stock index, 12 issues were higher yesterday, 13 declined and 5 were unchanged. Since last Friday, however, all 30 stocks have declined in value.

"I don't think it's an irreversible, catastrophic situation now . . . it's a financial revolt, a protest, a high-intensity protest against many aspects of the economy, many of them government policies," said Washington investor Leon Shinberg, who was waiting to chat with his broker at Ferris & Co. in downtown Washington yesterday.

He expressed concern that the new Federal Reserve policies "may be only a temporary answer" and called for new administration policies to encourage productivity. Shinberg welcomed the recent accord with organized labor on combatting inflation but he was skeptical about labor sticking to its promises.

His broker, Irving Wallace, noted that he had seen the sort of selling wave that hit securities offices this week before: after President Kennedy was shot, after President Eisenhower's heart attack, during the oil embargo of 1974.

Another investor, Milton Canter, described the wild selling this week as a "lot of panic by private individuals . . . I'm not seriously concerned and didn't sell anything, but I did do some buying."

He praised the Federal Reserve action as a "dramatic move they had to do" and forecast that interest rates would not remain at current high levels for very long.

George Ferris Jr., president of the Washington securities firm, echoed this view. "What (Federal Reserve Chairman Paul) Volcker has done bodes well over the long run. But for now there will be a slowing down of the economy, reduced demand for goods and services, a slowdown of corporate profits and also of corporate demands for funds . . . it's disruptive to the market, but it's better to have the day of reckoning earlier than later."

At Johnston Lemon, trading Vice President Patrick Ryan described the attitude of investors yesterday as "cautious optimism." Both individuals and institutions were in a bargain-hunting mood but as soon as an issue picked up a bit in price, some other owner sold and brought the price back, he said.

Investors "are not in any kind of a panic situation . . . as they were in the emotional market of Wednesday, a give-away day," Ryan said. He said his firm had puchased substantial blocks of stocks in some firms at the bargain prices offered by Wednesday's market and complained that a big problem on that record-volume day was just getting Wall Street traders to answer the telephones.

Bill Rothe, of the trading department at Alex. Brown & Sons in Balitmore, said last night that he was a "little encouraged" by yesterday's trading, which he called a standoff between profit-takers and bargain-hunters. But the market "is so umpredictable now, it could turn around again; you can't be sure."

Ryan also emphasized the sensitive state of the current market and warned of a possible further plunge next week if investors with margin accounts have some of their stocks unloaded on Wall Street next week because they can't come up with required money. "It's not quite a tight rope with a drop of 20 feet ahead, but there's no rush to come in and buy right now either," Ryan added.

Over the past week, the most substantial declines among local stocks, have been for retail firms and insurance companies. Consumers are expected to cut back somewhat on holiday purchases, and insurance profits always are sensitive to interest rate costs.

Since last Friday, Woodward & Lothrop has declined to $24 from $25.75, Garfinckel Inc. is down to $17.375 from $18.50, and Giant Food is off 78 1/2 cents to $18 a share. Geico Corp. has declined to $10.25 from $12.375 and Government Employees Life fell to $12.50 from $13.75.

Allegheny Airlines also fell to $6.75 yesterday from $8.25 last Friday, with analysts predicting less airline travel over the winter months.