Frustrated Optimism

The stock market was a matter of concern last week not only to harried investors but to businessmen worried about the impact of its slide on U.S. business psychology. In a week of wild gyrations, it plummeted as much as 12.2 points in a few hours, bounced back up again, roller-coasted through the week. At week's end the market was down to 622.23 on the Dow-Jones industrial average, the lowest point in five months.

Wall Street had a long face, but it was not weeping. It was not worried about any downturn in the economy; instead it was suffering from frustrated optimism. The Street and investors throughout the nation seemed to have forgotten that the decade's growth would not be evident immediately. Said A. Moyer Kulp, vice president of the Wellington Fund, second biggest U.S. mutual fund: "The market has been too impatient. Men's minds just got things soaring too soon." Seldom in Wall Street's history had the turnabout from giddy optimism to pessimism been so abrupt.

Now that they have come down to earth. Wall Streeters expect a year of steady growth instead of soaring boom, and a possible recession in 1961. But they do fear that the disappearance of paper profits may have made many investors turn cautious, at least temporarily; they are also unhappy at the decrease in stock buying, since they feel that only big volume when the market stages a rally is a convincing sign that the bottom has been reached. But many a Wall Streeter who thought that the market would reach its lows later in the year is now convinced that the lows are about over and that the market will reach its 1960 highs in the second half.

Despite the market slump, investors did not hesitate to plunge in where they thought they saw something good. After Paul V. Shields, senior partner in the Manhattan brokerage firm of Shields & Co., announced details of the deal to merge NAFI Corp. with Chris-Craft Corp. (TIME, Feb. 15), NAFI shot up 10 3/8 points during the week to close at 29 3/8, lead the exchange in trading. Polaroid rose more than 6 points during the week, and respectable gains were chalked up by Texas Instruments and Ampex.

A big part of the market slump has been blamed on the withdrawal of the institutions from the market some time ago. Many of them turned to bonds, short-term government securities, or cash. Last week there were signs that the institutions were coming back into the market. Massachusetts Investors Trust, biggest U.S. mutual fund, reported that it was fully invested in common stocks. The Boston Fund, which had been making "very heavy" sales of common stocks, stopped selling. Said John P. Chase, president of a Boston investment counseling firm, who manages two mutual funds and advises others with $400 million in other capital: "At the end of the year we were at our most defensive in 20 years. In the last week, we have done some buying of common stocks for the first time this year."

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