Down to Earth

The stock market last week took its hardest fall in nearly four years, but picked itself up nimbly by week's end with only a few bruises. On the first day of trading, the Dow-Jones industrial average dropped 14.78 points. Not since President Eisenhower's heart attack in September 1955 had a market break been so sharp.

The hardest fall was taken by the highest flyers, the space-age electronics stocks, which have soared giddily in recent months. Fairchild Camera & Instrument Corp. fell 23 3/4 points on the American Exchange. So great was the confusion when trading in Fairchild Camera was suspended temporarily that Exchange President Edward T. McCormick went onto the floor to discuss the break at Fairchild's trading post. Other electronics stocks followed; Texas Instruments fell 3 7/8, IBM 2 1/2. Zenith 4 1/8, Litton 3 1/2.

Though there was talk of a "peace scare," Wall Street agreed that the market was due for a technical correction after a headlong rise from last spring, saw the break as an opportunity for earnings and dividends to catch up with soaring prices. The drop was accelerated by news of the exotic fuel cutback (see Aviation) and poor earnings in aircraft companies.

No sector of the market showed the need for adjustment more than the electronics stocks. They have risen more than four times as much as the market as a whole since January 1958 (see chart), have outpaced every other stock group. The average ratio of price to earnings among electronics stocks is more than 25 to 1, and some have been selling at up to 100 times earnings. Fairchild Camera soared from 91 1/2 in April to 205 within three months, before dropping back to 142 3/4, where it is still at 50 times earnings; Texas Instruments has risen from 98 3/8 to 128 1/4 since April, is now selling at 40 times earnings.

Many stocks, including some electronics, regained much of the lost ground before week's end. Wall Street took the break in stride, cautious but unfrightened. With prospects ahead of an economic spurt once the steel strike ends, most Wall Streeters expect the averages to break through the 700 mark before year's end.

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