Federal Reserve Vice Chairman Preston Martin warned yesterday against going overboard in an effort to lower interest rates to spur the economy as two key Wall Street economists predicted economic growth would pick up later in the year.

Martin said that the Fed should try to foster stronger economic growth from its current sluggish pace. He added that it was hard to tell whether the economy would rebound from its current slowdown.

Martin said that the Fed's objective should be fostering "a so-called soft landing for the economy." In this way, output would be "growing somewhat toward the upper range of its potential rate, so that the excessive unemployment rate can decline gradually and the inflation rate can also decline gradually or at least not rise."

Federal Reserve Governor Henry Wallich yesterday predicted the nation's economic growth could be as low as 2.5 percent this year.

Before Martin spoke yesterday, however, the stock market went into an early morning tailspin on reports that Wall Street economist Henry Kaufman would predict that economic growth would rebound and send interest rates higher. Kaufman did make such a prediction and the market partially recovered after dropping 11 points. The Dow Jones Industrial Average closed down nearly 6 points.

Kaufman said the rebound was already under way but would not be felt until midyear when growth would reaccelerate to 4 percent or more following nearly flat growth in gross national product so far this year.

Wallich, in prepared remarks, said that considering current economic conditions, a deficit of between 1 percent and 2 percent of gross national product may be needed to create enough demand to keep the economy going. Under current conditions, such an approach might mean deficits of between $45 billion and $100 billion a year.

"These numbers suggest nevertheless that the U.S. could tolerate a sizable deficit provided the government is prepared to take that much saving away from the private sector and possibly from productive investment," Wallich said.

Former chairman of the Council of Economic Advisers Alan Greesnspan also joined the camp predicting renewed growth, saying that the economy would grow by 3 percent in the second quarter and could reach 4 percent by the end of the year.

However, hopes for stronger economic activity were dashed yesterday by the latest economic indicators, which suggested that further sluggish growth would continue into the second quarter.

Although the Commerce Department yesterday reported that new orders for durable goods rose 1 percent in April, following declines of 2.7 percent in March and 2.8 percent in April, two other important signals pointed toward less investment and expansion in the future.

Despite the overall rise in new orders, orders for nondefense capital goods, which are viewed by economists as a gauge of future plant and equipment purchases, dropped 6.9 percent following a 7.8 percent decline in March. This category of goods has been hard hit by the influx of imports made cheaper relative to domestic-made products by the high value of the dollar, economists said.

Defense capital goods orders, which tend to be very volatile, rose 6 percent in April, following a 32.5 percent increase in March.

"It's not quite as good as it looks because much of it was in the defense area and the remaining increases were rather spotty," said Commerce Department chief economist Robert Ortner.

Durable goods orders, which have been weak since last spring, accurately reported the slowdown in the manufacturing industries in recent months, Ortner said. That slowdown was highlighted on Tuesday by the release of figures for the gross national product in the first quarter.

Earlier estimates of growth of 1.3 percent that quarter were revised downward to 0.7 percent and many economists said that a sharp turnaround is not likely in the second quarter.

Factory orders were $100.7 billion last month, still below the $102.47 billion in February and the record high of $105.4 billion in January.

As a leading indicator the new orders statistics, which have slowed for about a year, "did their job," Ortner said. "They did accurately forecast that manufacturing would slow down and it did. And they're still telling us that story, that manufacturing for the time being will continue to drag until the dollar comes down more."

The bulk of the new orders increase was an 8 percent increase in primary metals orders and defense. Orders for machinery, an area hard hit by imports, were also weak.

"The problem is capital spending has continued to grow, although growth has slowed down somewhat," Ortner said. "But orders are continuing to be met abroad."

Imports are "gaining more and more market share here," Ortner continued. "Hopefully, the dollar will come down some more and our manufacturers who have been crowded out of our own domestic markets as well as foreign markets will begin to be crowded in again."

Another category considered a good barometer of future economic activity also declined last month. New orders for household durable goods industries dropped 0.2 percent in addition to the fall in nondefense capital goods.