Comeback & Pinch

The bull market was back on its feet again last week. In five days, the Dow-Jones industrial average climbed 4.45 to 212.66, recovering more than half of its June-July losses. This week, it climbed faster, with industrials jumping to 215.82 the first day. Railroad shares, which traders were touting as "war stocks," climbed even more impressively. At 62.85 the Dow-Jones railroad average was 5.89 points above the pre-Korean bull-market high.

Many investors, who had been panicked out of the market, had taken a sober second look at company earnings and backlogs, and were back in. They were buying peacetime stocks as well as war babies. Beset by a flood of orders trying to beat the gun on allocations, President Guy Wainwright of Indianapolis' Diamond Chain & Mfg. Co. summed up the situation of many a U.S. manufacturer: "We're doing next year's business this year."

Soap to Nylon. In the retail stores, some housewives were still trying to buy next year's soap chips, but the wave of scare buying seemed to be ebbing. Although department-store sales were down slightly, they were still 42% above a year ago. And the run on nylon stockings had spawned a grey market: some jobbers were charging hosiery manufacturers a 260% premium for delivery of nylon yarn.

Prices continued to edge up. The Bureau of Labor Statistics reported that retail food prices have risen 5% since April, are now less than 6% below their postwar peak. General Tire & Rubber Co. upped its prices from 5% to 7 1/2%, probably set the stage for an industry-wide price rise. A few companies went along with Cleveland's Lincoln Electric Co., which set up a priority system for deliveries to defense plants. And last week Reynolds Metals Co., second biggest U.S. aluminum maker, announced that it would allocate metal to buyers in amounts proportionate to their previous purchases.

Moreell to Sawyer. Some thought a similar deal was long overdue in steel. Although U.S. mills are now topping their wartime capacity by more than 11 million tons a year, production is still short of demand. For lack of steel and other materials, Studebaker Corp. stopped work on its $5.5 million North Brunswick Township, N.J. assembly plant. A shortage of steel also pinched the rest of the auto industry last week as production dropped to 174,830 vehicles, 9% below the previous week.

The pinch was not wholly caused by steel being diverted to war materials. But so many manufacturers were building up stockpiles that the auto industry did not get as much steel as it expected. To President Ben Moreell of Jones & Laughlin Steel Corp. the frantic buying--often at grey-market prices--spelled trouble. As wartime chief of the Navy's materiel division, ex-Admiral Moreell knew how quickly such buying might nip vital industries. Last week he suggested that Commerce Secretary Charles W. Sawyer should supervise a voluntary steel-rationing system.

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