(FORTUNE Magazine) – DESPITE the market plunge, chief executives interviewed for the FORTUNE 500 CEO poll, the second in a series, are mostly upbeat. They expect no recession next year, think company profits will exceed this year's, and believe the Dow Jones industrial average will recover some lost ground, though it will not return to the giddy August peak of 2722. They have steady nerves when it comes to the Persian Gulf. Most think the U.S. is showing the right degree of resolve in those roiled waters. That does not mean the CEOs have no beefs with Washington. ''We're heading toward Brokes-ville,'' growls Harry Todd, chairman of Rohr Industries, an aerospace manufacturer. Like other executives, Todd believes President Reagan and Congress must cut the federal deficit not only to bring order to U.S. fiscal affairs but also to calm world financial markets rattled by Black Monday. Says John Teets of Greyhound, the bus manufacturer and consumer products company: ''We elected these officials to make the tough calls. I make the tough calls in my company. They should make the tough calls in government.'' Cuts should come even if they fall close to home. ''You'd be awfully busy cutting before you ever got out of the farm subsidies and other goodies in the Agriculture Department,'' says Robert Sweeney, whose Murphy Oil owns 40,000 acres of mostly subsidized cropland. The poll was conducted Thursday, Friday, and Monday following the October 19 stock crash by Clark Martire & Bartolomeo, opinion researchers in Englewood Cliffs, New Jersey. The 80 respondents were picked from among the FORTUNE Industrial 500 and Service 500. In the first poll last August, when the stock market was near its dizzying high, top executives were about evenly divided on whether share prices would be up or down a year hence. Now most look for some recovery, but not a return to the stratosphere: 38% expect the Dow to range from 1500 to 2000 one year from now, and a whopping 53% see it at 2000 to 2500. Says Stephen Hassenfeld $ of Hasbro, the toymaker: ''The market will languish for a while, and I think it should, because it was way overpriced.'' Market gyrations haven't shaken the CEOs' faith in the economy. Close to the same percentage in October (78%) as in August (84%) say they do not expect two or more consecutive quarters of decline in GNP by the end of 1988. But Peter Buchanan of First Boston, the investment banking firm, speaks even for the optimists when he says, ''There's got to be some chance of a recession because of the emotional impact on consumer confidence of what's happened to the markets.'' Their bullishness stems in large part from the relatively bright prospects they see for their own companies. Wallace Barnes of the Barnes Group says he doesn't expect a recession because his order book is so fat. His company makes precision parts for the aerospace, appliance, automotive, and agricultural equipment industries, so Barnes regards it as a mirror of the economy. Many CEOs share Barnes's optimism: 53% believe 1988 profits will exceed this year's by more than 10%; 29% expect an increase in the 1% to 10% range. The CEOs are nearly unanimous in their support of the Reagan Administration's retaliation against Iranian attacks on American-flagged vessels in the Persian Gulf. Fully 91% say U.S. policy is neither too timid nor too aggressive but ''about right.'' Says Finn Caspersen of Beneficial, the financial services company: ''To achieve credibility, we have to protect our interests and those of our allies.'' But, adds Teets of Greyhound, ''I don't want to bomb Iran tomorrow because a guy shot a hole in a ship.'' WHAT SHOULD the government do to close the budget and trade deficits, stabilize the dollar, and strengthen the securities markets? When asked that open-ended question, nearly all the executives felt that Washington ought to do something. Says Buchanan of First Boston: ''Congressional leaders and the President have to sit down and come up with a strong action plan. Crisis usually helps to focus the mind.'' Nine out of ten CEOs advocate some combination of spending cuts and tax increases. ''Some middle-class entitlements have to be reconsidered,'' says Caspersen of Beneficial. Hasbro's Hassenfeld says he is a strong supporter of the military but believes the Defense budget could be cut because ''it's been going up at such a fast clip.'' One dissenter is John Bryan, chairman of Sara Lee, the food company: ''I don't think the President will or should change his - fundamental position on taxes.'' Most chief executives believe that the trade deficit also needs strong intervention by the government, though they are pretty vague on prescriptions. Only 13% suggested that the U.S. should force trading partners to open their markets to American goods. Bryan of Sara Lee is in the minority on trade policy too. He says the trade deficit will ''correct itself.'' Computerized trading and complicated speculative instruments, like index futures, are part of what ails the financial markets, at least according to some CEOs. ''If you prune away those speculative devices,'' says Todd of Rohr, ''you begin to get back to a much less volatile market, and the quick-buck Charlies will go back to Las Vegas where they belong.'' The tricky ways of playing the market remind Wallace Carroll of 1929, when he was 22 years old. ''Margin calls did the job then, program trading will do it now,'' says Carroll, 80, one of the few CEOs who expect a severe recession or depression. His company, Katy Industries, is a conglomerate that has among its products Jacuzzi spas, a business that would be especially hurt if sybaritic yuppies find their paychecks crimped. Accordingly, Carroll has paid off $54 million in bank loans and delayed capital spending. He plans to keep inventory lean. ''I wouldn't be taking all these steps if I hadn't gone through the Great Depression. But once burned, twice shy.'' Even CEOs who don't expect another depression might do well to follow Carroll's injunction to his staff: ''Nag the hell out of your overdue accounts.''

BOX: Q RECESSION Do you expect a recession -- that is, two or more consecutive quarters of decline in real GNP -- by the end of next year?

A Yes 17% No 78% Not sure 5%

Q PROFITS How do you expect your company's 1988 profits to compare with its 1987 profits?

A 1%-10% higher 29% More than 10% higher 53% 1%-10% lower 8% More than 10% lower 1% No change Not sure 9%

Q THE MARKET Where do you expect the Dow Jones industrial average to be a year from now?

A Below 1500 1% 1500-2000 38% 2000-2500 53% Above 2500 7% Not sure 1%

Q FOREIGN POLICY Is U.S. policy in the Persian Gulf: A. too aggressive B. not aggressive enough C. about right

A A 4% B 5% C 91%

Q THE DEFICITS What, if anything, should the government do to close the U.S. budget and trade deficits, stabilize the dollar, and strengthen the securities markets?

A (MOST FREQUENT RESPONSES) Reduce spending 34% Reduce spending and raise taxes 34% Pressure trading partners to open their markets 13% Regulate or outlaw program trading 13%

CREDIT: NO CREDIT CAPTION: NO CAPTION DESCRIPTION: See above.