The Breakthrough

Just after lunch on Friday last week, Wall Streeters were seized with joy. Traders in the New York Stock Exchange cheered, jumped up & down, and thumped each other. Reason for excitement: the Dow-Jones industrial average had broken through its previous high mark of 187.66 --made in 1947--as the rail average had done 19 weeks before (TIME, April 19). Under the famed Dow theory, which many traders swear by, that meant only one thing: a bull market.

As brokers flashed the word, the Stock Exchange was deluged with orders to buy. In the final hour of trading, close to $30 million worth of shares were sold; the highspeed ticker fell behind as much as five minutes.

By closing time, stocks had jumped up one to ten points. The industrial average was up 3.78 points to 188.60. Rails closed at their best level (62.24) since Aug. 20, 1946. Total turnover for the day: 3,840,000 shares, the Big Board's biggest volume since May 1940,when prices crashed as the Germans broke through France.

Second Wave. Next day the Exchange was again swamped with buying. Records fell right & left. In Saturday's brief two-hour session, 2,590,000 shares changed hands--the biggest Saturday turnover since the feverish beginnings of NRA in 1933. As in the hectic days of 1929, single blocs of 3,000 shares and more changed hands without driving down the price (e.g., Packard Motor closed up 1/8 after one bloc of 21,000 shares was sold for $105,000).

Averages were up again; the Dow-Jones industrials closed at 190.25. Again the ticker fell behind. For the first time in 20 months, the Big Board had to put out "flash" quotes (i.e., break the sequence of transactions by flashing the latest prices of such key stocks as U.S. Steel and General Motors). At week's end, stocks on the Big Board were worth some $3.5 billion more than at week's start.

High Tide? The why of the breakthrough was hard for brokers to analyze. There had been no rosy market news. The explanation seemed to be that investors, who had been shooed away from buying by talk of recession, had finally realized that many a stock was vastly underpriced, and that profits had a good chance to stay high for some time to come. (The tax cut had also released some investment cash.)

Now that the break had come, the big question was: How high would it climb?

The chartists had a rough clue in past performance. After previous bull-market "confirmations" (breakthroughs), the Dow-Jones industrials had a total rise from 30 points (1938), to 74 (1943-46), to in (1933-37), to 287 (1923-29).

Nevertheless, even the most religious followers of the Dow theory knew that this was no guaranteed guide to the future. In effect, the breakthrough last week simply "proved" to the theorists that a bull market had been under way since the 1947 low of 161.38, following the collapse of the big bull market in 1946. But the market had been within 3.65 points of that low mark as recently as March, thus proving that even in the theorists' bull market an investor could lose his shirt.

But the market started out strong again this week. As it opened Monday, a rush of profit-taking chipped off some of Saturday's gains. Then a wave of new buying shoved the industrial averages up 0.19 to 190.44, third new high in as many days. Almost 3,050,000 shares were traded. It looked as if the bull market had its feet firmly planted.

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With its eye on the booming market, General Motors decided to sell the public its 29.1% interest (1,000,061 shares) in North American Aviation, Inc. The sale, to be made soon, is in line with G.M.'s policy to get out of companies with which it has no "direct business relationship." (It recently unloaded an 18.9% common stock interest in Bendix Aviation Corp. and 344,000 shares of Greyhound Corp.) To make the separation complete, North American President James Howard ("Dutch") Kindelberger was moved up to replace Henry Michael Hogan, a G.M. vice president, as chairman of North American's board.

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