A speculative fever is beginning to mount in the stock market, and some Wall Street officials worry it could build to the same kind of burst bubble that not only ruined many investors in the early 1970s but sent stocks into a near-decade of decline.

"We're back on this crazy growth kick," said Leslie J. Silverstone, who heads the Washington office of Dean Witter Reynolds Inc.

Executives like Silverstone and Patrick Ryan of Johnston, Lemon & Co. Inc. have warned their brokers to watch for speculative activity among their customers.

"You can't stop people from speculating with the college savings, but you can make sure they know what they're doing," Ryan said.

"The market has been highly focused during the last six months on technology stocks. There's been an enormous amount of participation by both individuals and institutions. I see that as an indication of some degree of speculation. But there are many areas still where it is not yet apparent," according to John Johnson, chairman of the advisory committee for T. Rowe Price & Associates New Horizons mutual fund.

The fund invests in small, growth stocks, and the rising value of those stocks is causing fund management some concern. Twice, once in the late 1960s and again in the early 1970s, management of New Horizons closed the fund down because it felt the stocks were too highly priced to warrant continued investment.

"We're not there yet," Johnson said. But Johnson and managers of other similar mutual funds are watching carefully. In recent years the stocks in the New Horizons fund were selling between 7 and 10 times the annual earnings of the companies. Today some stocks are selling as high as 30 times earnings.

It is natural that many smaller companies with faster-than-average earnings growth and good positioning in emerging industries should rise in price more swiftly than mature companies.

Yet when investors begin to buy stocks on the notion that they will be able to sell them to someone else at a higher price, rather than basing their decisions on the earnings and growth potential of the stocks themselves, that's when trouble begins.

"If that happens, the market becomes all froth. You begin to get a tremendous demand for new issues even before investors read the red herring [the prospectus that the Securities and Exchange Commission requires all companies to issue before trying to sell securities to the public]," according to Frederick Joseph, who heads the underwriting department at Drexel Burnham Lambert Inc.

"But as soon as one, two or three go down, then the speculation goes down," Joseph said.

In recent weeks, he noticed, some of the hot new issues have gone down about 10 percent or 15 percent -- enough, he thinks, to cool some of the speculative fever.

Silverstone said the speculative fever has not cooled as far as he can tell. "I had a meeting with my staff about it last Tuesday," he said. "I was trying to give the brokers some perspective. The [small growth stocks] are up now, and they're going to come back down. We're trying to hold people back. A lot of brokers weren't around in the late 1960s, and some of those that were forgot what happened."

"We're not there yet, but we're on the way," Silverstone said.

Genentech Inc., the small California company that specializes in genetic engineering, probably is the headiest example of the speculative craze that is showing up increasingly in investment decisions.

The company, founded four years ago, accumulated more than a million dollars in losses so far, although it began to show a small profit last year. But genetic engineering has become one of thehot public areas ever since talk began to float about interferon, the antiviral substance the body makes in small quantities but that gene-splicing techniques might be able to make in large quantities. Interferon holds out promise for fighting cancer, among other diseases.

Despite its unproven status, underwriters sold the stock to the public at $35 a share, which seemed a heady price even to investors in the company. But the stock was barely public for five minutes when frantic buyers who could not get any of the 1.1 million shares from the underwriters bid the price to near $90. John Whitehead, chief partner in the big brokerage firm Goldman, Sachs, called investor response to Genentech a "danger signal."

The swift rise of Genentech will "attract offerings of other issues of lesser quality where attempts will be made to create the same aura of scarcity that" surrounded the Genentech issue.

Genentech has since settled back to less than $60, still a huge premium over its initial price and many hundreds of times its earnings.

But even before Genentech attracted investor eyes last month, other so-called technology stocks were climbing swiftly and could soon reach price levels that are totally out of whack with what professionals would call a company's "fundamentals."

Last June a small research firm, Enzo Biochem Inc., quadrupled in price shortly after it went public. Enzo Biochem has assets worth less than a nickel a share but sold initially for $6.25 and soared above $25. New Brunswick Scientific Co., which supplies equipment to genetic research labs like Genetech, saw its price climb from $2 to $18 in less than a year.

The fever is not confined to biology. Computer stocks are in the craze, too. Tandy Corp., although a big and fast growing company that owns Radio Shack, has risen 200 percent in the last year, according to T. Rowe Price's Johnson. Other technology stocks, such as Applicon, have logged strong but not quite so spectacular price increases.

Investors are waiting anxiously for the first public offering of Apple Computer Inc. The small personal computer maker plans to go public (sell shares of stock in itself) later this year. Analysts predict Apple will replace Genentech as Wall Street's hottest new issue.

Silverstone, of Dean Witter, said new developments in investments in the last decade have made investors -- both individual and institutional -- more prone to invest small amounts to reap big returns.

"First there's the options market, where investors have learned to buy for $3 and sell for $6. They've learned about speculation through the options market. In recent years stocks on the American Stock Exchange have done better thanthose on the New York Stock Exchange." Generally American exchange stocks are smaller and lower-priced than Big Board stocks. a

Furthermore, Silverstone said, there is a lot of money sitting on the sidelines waiting to be invested. "That pent-up demand contributes to the big increases in stocks," he said.

While Johnson at T. Rowe Price said the value of the stocks in the fund is still not so high as to cause problems, he noted that in recent years the price-to-earnings ratio of the stocks in the fund average about 20 percent higher than the price-earnings ratio of the 500 stocks that make up the broad-based Standard & Poor's index.

Today the New Horizon stocks have a price-to-earnings ratio about 63 percent higher than the S&P stocks. When New Horizon fund stocks have an average price-to-earnings ratio double the S&P 500, Johnson said, then the fund's managers will have to wrestle with the difficult problem of deciding if the fund is "overvalued."

"We're concerned on a stock-by-stock basis now, but as a group we still think they represent fair value. I'm not inclined to be overly concerned, yet, but there are forces at work that could change that," Johnson said.