Wall Street: Bad Week for the Bears

Outside a dining room at the New York Stock Exchange stands a statue showing those indefatigable financial foes, the bull and the bear, locked in mortal combat. The bear seems to be losing, which is precisely what happened in the market last week. After a long, cold summer, the Big Board experienced its most dramatic one-day advance in three years. And papa bears, mama bears and baby bears, all of whom had been betting on a continued decline, suddenly found themselves running for cover.

It started on Monday. Ever since the alltime high last February, when the Dow-Jones industrial average stood at 995. 1 5, Mondays have been mostly blue.

Monday, Oct. 10, started the same way, with the average in early trading off almost six points from the closing price of the previous week. Then came the comeback. Led by such glamour stocks as Sperry Rand, Polaroid, Fairchild Camera and Xerox, the market made a broad advance, and the industrials finished the day with a 10.9 point advance.

Happy Columbus Day. Tuesday ended with the industrial average up an other 4.12 points. And on Wednesday —Columbus Day — the market soared. On a high-for-a-holiday volume of 6,910,000 shares, the average climbed 19.54 points. It was the biggest one-day increase since Nov. 26, 1963, when the industrials leaped 32 points in a Wall Street show of confidence in the four-day-old Administration of Lyndon Johnson. The day’s performance was enough to overcome minor declines in the next two days. The market closed at 771.71, providing a 27.39-point increase in the industrials for the week as a whole, one of the best in a long while.

Why the resurgence? The most obvious reason was that many stocks had been oversold and there were bargains to be had. Another reason, as the week went on, were encouraging words from Washington about one of Wall Street’s nagging worries. The Street has feared for some time that Viet Nam might bring on wage and price controls, as the Korean War did, which would dampen profits and decrease stock values. But last week Commerce Secretary John T. Connor told a Washington conference that there was “no indication now” of controls being necessary. Administration Economics Adviser Arthur M. Okun put it more strongly. Said he of the Korean-style control system: “There is no earthly reason why we should want to or need to travel that route again.”

Selling Short. The biggest reason for the week’s activity was a bear stampede. After selling borrowed shares, bears aim to cover their loans and also make a tidy profit by buying the same stock when prices have declined still lower. Big bears have been following the practice all summer long. Little bears followed and, as of last fortnight, short sales by odd-lotters (selling fewer than 100 shares) reached their highest level in more than 30 years.

As often happens, the little bears got into short-selling just in time to be badly hurt; they had to scramble quickly as the averages rose to cover short positions in both glamour stocks and blue chips. As a result, both highflyers and such long-dull blue chips as A.T. & T., Chrysler, Du Pont, Jersey Standard and U.S. Steel were traded unusually heavily, and most ended the week with a gain.

Although the upturn left bears licking their wounds, few Wall Streeters were willing to bet that the bulls were firmly on top once more. In spite of some rosy earnings reports—IBM last week reported a record third-quarter profit of $131 million—many investors are still worried about the possibility of an economic downturn next year.