Mass Exodus

After a few days of relative calm on Wall Street, investors last week decided again that the stock market was no place for their money. Rushing in with sell orders that pushed volume on the New York Stock Exchange up to a frantic 6,240,000 shares, they knocked the Dow-Jones industrial average down to 560.28 on Thursday. June 14. It was the lowest close since December 1958. Next day there was a predictable rebound, as short sellers moved in to replace at bargain prices stock that they had borrowed when it was higher. Even so, the Dow-Jones index rose only to 578.18--which left it off 23 points for the week.

Once again the stocks that took "the worst pummeling were the formerly high-riding "growth" issues. Though it ended the week at 333 1/2 IBM (1962 high: 578) plummeted to 300 on Thursday--at which point, the Wall Street Journal caustically noted, its yield to investors rose to 1%. Polaroid (1962 high: 221) dropped from 109 1/4 at the beginning of the week to 81 1/2 on Thursday, closed on Friday at 98. Even blue-chip A.T.& T. had a hard week, sliding from 109 to 105 7/8. Said Sidney B. Lurie, a partner in Manhattan's Joseph-thai & Co.: "There's a mass exodus on the part of investors. The professionals raised their cash earlier in the year; now the amateurs are getting out."

Slipping Pros. Lurie's thesis was borne out by a newly completed New York Stock Exchange analysis of just who did the damage on Blue Monday. Contrary to Wall Street rumors of heavy dumping by European interests, it was primarily selling by small investors that greased the skids on May 28 and the morning of May 29. Last week's dip was also apparently the doing of relatively small investors who, desperate to get out, were belatedly trying to follow the market adage that advises selling on the rallies. Whenever the market opened with a little rally, it was quickly smothered in sell orders.

What is the small investor going to do with the extra money he does not put into the market? Since stock prices began to skid six months ago, many people have retreated to the safety of savings accounts and insurance policies. The Federal Home Loan Bank last week reported that in the first quarter of this year, savings of all kinds climbed a record $8.9 billion to nearly $346 billion. Other investors, reluctant to leave the excitement of the market altogether, have been turning to mutual funds in the hope that professional investment management will see them through. But the fund managers have not done so well, either: since December, the asset values of 15 of the 20 biggest U.S. mutual funds have dropped even more sharply than the Dow-Jones average. (But of the top five funds. Investors Mutual. Wellington Fund and Affiliated Fund did better than the average.)

No Blossom. Though many stocks are now down to attractive price-earnings ratios, the general public's buying spirit got little encouragement from many of last week's economic indicators (see THE NATION). More and more, investors were showing themselves disappointed in the sluggishness of the recovery and no longer hopeful that it will blossom into a boom or superboom. "Best guess at this point," wrote Walston & Co. Market Analyst Anthony Tabell. "is that it will be fairly close to two years before we have the start of another major bull market."

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