Surprise

For businessmen who pride themselves on inside dope, Wall Streeters were caught flat-footed last week. The Federal Reserve Board announced what no one on the street had expected: a cut in margin requirements (money that must be put up to buy stock on credit) from 70% to 50%. For a few heady hours next day, the market marched uphill. But before day's end it had marched right down again. It closed the week at 444.12 on the Dow-Jones industrial average, up 5.44 points, mostly on gains made before the announcement.

No one was quite sure why the Federal Reserve had lowered margin requirements at this time. Wall Street looked on it as a move to bolster investors' confidence, although the Fed insisted that its motives were not that at all. Said a Fed spokesman: "Our only interest is in loosening a credit restraint that was no longer needed." Actually, the higher margin has not been needed for months. Since last June, stock-market credit affected by margin requirements has declined steadily, at latest report stood at only $5,218,000,000, the lowest point in three years and less than 3% of listed stock values on all registered exchanges. But the margin cut may make the market broader, bring heavier trading, help eliminate the thin markets that have caused stocks to gyrate wildly on a comparatively few shares. It should also prepare the market for a healthy rise should business suddenly change for the better.

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