Lower interest rates may be beneficial for the stock market in the very near term. But stocks won't rally substantially until the financial markets are convinced that lower rates are putting some pep back into the U.S. economy. And that could take many months.

Everyone on Wall Street last week was anticipating interest rate cuts by the Federal Reserve. And stock prices rose as a result.

But the experts agree that while share prices might climb a tad more in the weeks ahead as rate cuts are actually announced, it is much too early to expect that a bull market will result from any easing of monetary policy by the Fed. Larry Wachtel, the stock market analyst at Prudential-Bache Securities Inc., said that unless the Fed cuts rates by a surprisingly large amount in the next few weeks, "everyone's eyes will glaze over and they'll go back to sleep."

And even if the Fed does reduce rates more than expected (perhaps with an aggressive move like a reduction in its discount rate), the stock market will view the move skeptically until it sees signs that banks are beginning to lend money once again and corporations and consumers are willing to borrow. The big fear on Wall Street these days is that the Fed might be "pushing on a string" -- which is another way of saying that you can lead a borrower to lower interest rates but you can't make him borrow.

L. Crandall Hays, director of investments at Robert Baird & Co. in Milwaukee, says the stock market will soon come to an equilibrium point at which there will be a standoff between those worried about the economy and those happy about lower interest rates. At that point, the stock market will decline if it looks like the recession will be deep or rise if lower borrowing costs are stimulating growth. "At some point, you look beyond the recession. But first you have to know how deep and how long {the recession} will be," says Hays.

There are, of course, some other factors that must be included in any analysis of the stock market.

While Wall Street tended to ignore the Middle East situation last week, what happens in Kuwait is vital to both the stock market and interest rates.

If the Middle East dilemma is resolved quickly and without causing inflation to rise, the world will have an opportunity to lower interest rates. War in the Middle East, on the other hand, could cause inflation to rise and sidetrack cuts in interest rates.

Another important factor is the health of the nation's banking system. The failure of even one money-center bank could negate any positive effect of lower interest rates.

William Raftery, vice president of technical research at Smith Barney, Harris, Upham & Co., says his firm recommended early last week that clients increase their exposure to stocks by a small amount. But he's not expecting equity prices to rise sharply just yet, even if interest rates retreat. "We don't see a major turnaround for the market for a while," says Raftery.

The vast majority of Wall Streeters are assuming, of course, that the Fed can reduce interest rates anytime it wants. But a small group of pros is worried that this might not be the case in 1990. This group is concerned that if the Fed does try to reduce rates by a significant amount, it will cause the dollar to collapse and intensify the exodus of foreign investors from U.S. financial markets. Then interest rates would have to be raised to again attract foreign investment.

The higher interest rates that would ultimately occur under this dire scenario could also result in sharply lower stock prices in the months ahead.

As if the investment banking community doesn't have enough problems, experts say the number of liability cases is rising against the guys and gals who brought the world all those mergers in the 1980s.

Experts say that they expect the heat to be turned up under investment bankers as more and more of the takeovers fashioned over the last decade encounter trouble.

That bit of news may cheer up any worker who lost his or her job as the result of the takeover tidal wave of the 1980s. But on Wall Street, where investment bankers are quickly become lepers, liability claims could be the final disaster.

Arthur Aufses, a partner with the New York law firm of Kramer, Levin, Nessen, Kamin and Frankel, says some investment bankers simply goofed when calculating the tax and accounting consequences of a transaction.

"Typical areas of investment banker failure include erroneous mathematical calculations in arriving at conclusions and undue reliance on representations made by management and others," says Aufses.

Aufses, an expert on the subject, says only one case so far has resulted in damages against an investment banking firm. But he says that "the number of cases against investment bankers is increasing and the courts seem receptive to them."

Directors in the past have been very vulnerable to suits from shareholders, and this has resulted in a sharp increase in insurance costs. Investment bankers aren't taking out insurance, but many are requiring the companies they work for to agree to indemnify them against claims.

Some other problems: Investment bankers also sometimes overvalue a company because they fail to recognize how important one person is to the business. But Aufses says he is not aware of any case of purposeful misconduct or criminal behavior.

"Financial advisers are going to find themselves under attack in connection with any failed financial institution," says Aufses.

Questions have already been asked in court about the performance of investment bankers working on the takeovers of Metromedia Co., Meyers Parking System Inc., Nationwide Corp., Nutri/System Inc., RJR Nabisco Inc. and others, says Aufses.

The purchase of a 200,000-share block of Lockheed Corp. stock right at the close of trading on Monday has raised some regulators' eyebrows. The block was bought at $30.25 a share. Little more than an hour later, Harold Simmons's NL Industries made a proposal to acquire Lockheed. The stock opened at $32.37 1/2 on Tuesday. The regulators are curious about the coincidence.

John Crudele is a columnist for the New York Post.