Discounting the Dip

Be the news good or bad, Wall Street seldom quivers twice over it. Last week the stock market not only shrugged off the anticipated drop in first-quarter corporate profits but sprinted to a new peak for 1967. Responding to growing indications that the economy will turn up later this year, the Dow-Jones industrial average climbed 13.87 points to close at 897.05. On top of earlier gains, that gave the market a 43.71-point lift in three weeks--for its strongest rally since January. And it left the Dow-Jones only an edge below the 900 level, which many brokers consider the last psychological barrier to a bounding bull market.

Though the Dow average of 30 blue-chip stocks has now erased three-fifths of its 1966 slump, broader gauges of the market show even more striking recovery. Standard & Poor's index of 425 industrials last week soared to an alltime high of 101.16, and the ten-month-old composite index of all 1,267 common shares traded on the New York Stock Exchange reached a new peak of 51.54.

Altogether an impressive 416 Big Board stocks last week hit new highs for the year. Many investors had already discounted first-quarter setbacks and were buying in expectation of a strong year. General Motors gained $5.25 a share despite a 34.5% plunge in profits (see following story). Chrysler, which rose $2.63 two weeks ago in the face of a 71% profit dip, added another $1.75 last week to reach a 1967 peak of $44.25. When Du Pont reported a 24% profit decline two weeks ago, its shares jumped from $147 to $158.25; last week Du Pont traded as high as $167.50 before easing back to close at $165.75.

However bullish such performances among blue chips may look, high-flyers such as Avco, Syntex and Control Data have actually led the spring spurt. Last week Polaroid (up $10.63), Motorola (up $14.13) and Teledyne (up $15.75) carried on the surge, and IBM shot up a whopping $28.50, thanks to a $17 jump Thursday, to close at a record $496.50 per share. But the industrials are catching up, partly because cash-heavy institutional investors (notably mutual funds) are upping their purchases. "The more the glamour stocks go up," explains Richard Buchsbaum, research director at W. E. Hutton & Co., "the cheaper the blue chips look."

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