The Pre-Invasion Market

The Pre-lnvasion Market

On D-day minus one, a happy Wall Streeter cried: "The market has recovered from the invasion jitters." Next day came the invasion, and all market-guessing was 100% off. No one could tell how the market would eventually settle. But in the first few hours the market was rising, and many a stock hit new highs for the year.

There had been plenty of reason for optimism. Since March, the New York Stock Exchange has quivered on every D-day rumor. But last week, taking its courage firmly in hand, the Exchange: 1) had its busiest day of the year, turning over 1,193,080 shares; 2) saw the Dow-Jones industrial average rise to 142.24, a new peak for 1944.

What especially excited Wall Streeters were the symbols which clogged the tickers. A little more than a year ago, Exchange President Emil Schram cried out a warning against the unhealthy boom in the low-priced "cat & dog" stocks (TIME, March 15, 1943). Last week, the "blue chips" led the parade of some 245 stocks onto new high ground. A.T. & T. hit a three-year peak, while Chrysler, Westinghouse, General Motors, Du Pont and many a retail-store stock reached new highs for 1944. And the tone had changed. Grumblers had long complained that every slip of the market meant that U.S. investors have no faith in the peace. But now, day after day, "peace" stocks charged ahead, while "war" stocks lagged.

Boom in Juniors. Quietly, unspectacularly, corporate bonds moved up also--to a seven-year peak. With plenty of cash in their pockets, bond-buyers went bargain-hunting, notably in the "junior" bonds (second liens) of many a borderline railroad bailed out by the war. This made the boom in juniors the phenomenon of the year to date. Example: Illinois Central 55 (1955) hit 90 last week, up some 20 points since the first of the year.

The boom seemed to be based on the fact that U.S. railroads, in general, have sensibly used a large chunk of swollen wartime profits to buy up their bonds and slash their fixed charges. Many are in the best financial shape of their lives. Traditionally, when these bonds move up toward par, stocks eventually follow. Example: Louisville & Nashville 53 (2003), above par at 107, have fluctuated only one and a half points in a year; the road's stock has soared 20 points to 90 1/2.

London Booms. But the optimism of Wall Street last week was modest compared to the bursting enthusiasm of the London market. Stocks hit their war peak, according to London's Financial Times industrial average. This brought a bitter cry from The Daily Herald (labor) about this "orgy of gambling."

The latest British boomlet was touched off by shipping shares. It was bolstered by Prime Minister Churchill's promise fortnight ago that a plan for postwar steel houses would mean heavy orders for the steel industry. And then it soared after the reluctant admission of Sir John Anderson, Chancellor of the Exchequer, that the cost of living must be allowed to rise five points. Thus, by plunking cash into the market, Britons could hedge against wartime inflation and bet on postwar prosperity. Added inducements: no double tax on dividends, as in the U.S., no capital-gains tax. Underlying all this is the fact that Britons (both corporations and individuals) who have cash in their pockets can find almost nothing to buy. British money can only go into banks, bonds, or the market.

Rise Ahead? Both markets withstood the first shock of Dday, just as both had tumbled at the Fall of France in 1940. But otherwise, each had its own unfathomable methods of deciding whether news was good or bad. Typically, while the Japs were lopping off the Malay States and Singapore in early 1942, the New York market tumbled. The London market declined, but rallied quickly. And percentag-wise, it has climbed far higher than has New York.

Did this mean that the New York market had a long rise ahead? No Wall Streeter would climb out on this limb. In fact, many were betting the other way. But for the nonce the cheer overbalanced the gloom.

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