(FORTUNE Magazine) – Who says a rising tide lifts all boats? No one on Wall Street. So far this year Standard & Poor's 500-stock index has returned 29% to investors, but not everyone has stayed above water. As the chart below shows, the gulf between the best- and worst-performing stock groups has been wide enough to sail a tanker through. Returns from energy stocks, the best-performing group, are nearly ten times the returns from the worst group, utilities. Part of the reason for the wide disparity is Wall Street's tightening focus on earnings. When interest rates were falling last year, investors were willing to pay more for stocks almost regardless of earnings, so the whole market prospered. Now, with rates leveling and possibly moving up, investors are getting picky. ''This is an earnings-driven market,'' notes John Connolly, investment strategist at Dean Witter Reynolds. Companies that register powerful profit growth will thrive on Wall Street, while those that don't, won't. In the champion energy sector, stocks of offshore drilling companies have been absolute gushers, returning 193% since January, more than any other subgroup of stocks. Domestic and international oil producers rose 46% and 41% respectively. That performance makes sense in an earnings-driven market: A recent poll of analysts conducted by the Institutional Brokers Estimate System reveals that Wall Street expects energy group earnings to rebound 75% during 1987.

Despite all that sizzle, the oil-related stocks may soon fizzle, some analysts fear, simply because they have come so far so fast. ''Now is a great time to take profits,'' advises Warren Shimmerlik, an oil analyst at Merrill Lynch. He notes that oil stocks, which usually trade at lower P/E multiples than other stocks, now sell for the same P/E multiple as other stocks, or even higher, and that's a worrisome sign. Higher product prices are leading to bounding profit growth for raw materials producers, such as aluminum, paper, and metal companies. The group should increase earnings 63% this year, an important reason the stocks have been among the market's strongest. Aluminum and steel stocks have been especially powerful, rising more than 80% on average this year. Though prospects are still bright, analysts say the sharp run-up marks a wise time to become more selective. John Connolly at Dean Witter thinks Phelps Dodge and Inland Steel still pack plenty of potential. Two groups that should soon emerge as market leaders, analysts say, are technology companies and capital goods producers. Both are prime beneficiaries during the latter phase of an extended economic upswing, notes Robert Arnott, an investment strategist at Salomon Brothers. ''The capacity utilization of basic industries like chemicals, paper, and aluminum is already running at very high levels,'' he notes. ''It's now at the point where these industries start adding to plant and equipment.'' Such a trend would shoot new life into the earnings of companies that supply such heavy-duty capital goods as machinery and electrical equipment, as well as those selling computers and other high-tech items. For now both groups are benefiting from the lower dollar, which makes their products more competitive abroad. Though order rates at most equipment suppliers are only slowly improving, gains should accelerate later this year and next, Arnott expects. His firm favors such slimmed-down competitors as Caterpillar and General Electric as well as technology companies like Texas Instruments and Digital Equipment. Connolly of Dean Witter agrees that these stocks will be the market's late bloomers. In addition to Caterpillar, he likes Illinois Tool Works, Parker Hannifin, and Emerson Electric among capital equipment companies. He also favors Unisys among technology stocks. Industries that rely on the consumer could be in for hard times. ''The consumer is overextended,'' says Arnott. Savings rates are at a 40-year low, and he thinks consumer debt is already high. Rising interest rates should put a damper on the outlook for homebuilders like U.S. Home and Pulte Home. The lower dollar is helping U.S. automakers fight foreign competitors, but analysts suspect that a new-car buying binge is unlikely. Conclusion: Further big profit improvements at the automakers are unlikely. Stocks of companies that sell consumer staples, such as food and tobacco, are less subject to the business cyle. They also interest foreign investors, particularly the Japanese, who like such household names as Coca-Cola and Pillsbury. But these stocks have surged lately, and Connolly at Dean Witter thinks it is time to get out. ''The market favors stocks with exceptionally strong earnings prospects, and these stocks just don't have them,'' he says. Investors who fashion themselves value buyers are loading up on interest- sensitive stocks, such as banks, insurers, and even utilities. Because these have been laggards this year, some look quite cheap. Ernest Liu, a utility analyst at Goldman Sachs, notes that the dividend yield on electric utilities is now three times the yield on industrial stocks, a rare advantage. But unless interest rates decline, these stocks won't do much in coming months. The bargain hunters buying them may make out in the end, but they will need saintly patience.

CHART: NOT AVAILABLE CREDIT: ILLUSTRATIONS BY MICHAEL BARTOLOS SOURCE: SMITH BARNEY HARRIS UPHAM & CO. CAPTION: Look Who's Making a Splash Higher prices for commodities from oil to aluminum have powered energy and raw material stocks this year. Higher interest rates have kept utility stocks out of the race. DESCRIPTION: Return to investors in energy, raw materials, consumer cyclicals, technology, capital goods, transportation, consumer staples, financial firms and utilities for January 1, 1987 to July 15, 1987; color illustration of swimming race.