The Energy Chill

One of the hoariest of all Wall Street adages is that the stock market can stand almost anything except uncertainty. As investors try to evaluate what the energy crisis is likely to do to the economy, they can now see nothing but uncertainty-and sure enough, the market cannot stand it. A nearly perpendicular drop in prices has sheared a staggering $100 billion off the value of exchange-listed shares in the past six weeks and plunged Wall Street into its blackest gloom in two decades. In brokerage offices, the talk is all of margin calls, possible failure of some big investment houses and actual or potential unemployment for analysts and brokers.

The depth of the pessimism is not always apparent; the drop has been interrupted by some spectacular, though short rallies. One volcanic surge that carried over into early last week lifted the Dow Jones industrial average 60-odd points in three days. One reason: heavy selling has depressed prices of two-thirds of the stocks listed on the New York Stock Exchange to ten times earnings or less, and investors now and then move in herds to pick up bargains that by past standards seem remarkable. But so far every such rally has quickly run into a wall of selling by investors seizing the first opportunity to get out and cut their losses, and the recent one was no exception; the Dow sank at midweek, and despite a Friday bounce closed at 815.65, down 22.40 for the week.

Wall Streeters are especially shaken because, for the first time that most of them can remember, the nation faces a crisis for which they can imagine no short-term solution. A lifting of the Arab oil embargo would no doubt produce an explosive rally, but investment men are already predicting that it would not last; everyone knows only too well that the unpredictable Arabs can always turn off the flow again. Analysts who can usually produce a string of "buy" recommendations every day are throwing up their hands; they complain that they simply cannot forecast 1974 or 1975 earnings of major companies. About the only stocks they can recommend are those of a handful of firms that stand to benefit from the energy crisis: coal companies, some railroads, makers of mining and drilling gear and firms that design or make equipment for power stations and refineries.

Brokers are further unnerved by the suddenness of the plunge. As recently as late October, the market had managed to look sound; hot analysts were being wooed by hefty salary offers, and small investors, long absent from the market, were starting to nibble again. Now many of the analysts are worried once more about their jobs. No fewer than 22 member firms of the N.Y.S.E. are on the Big Board's "early warning" list, meaning that they have been advised that their capital position has deteriorated dangerously and that they had better do something about the situation -and fast. Thousands of small investors have returned from off-season vacations to find telegrams informing them that their margin accounts have been sold out. Margin calls by two big Wall Street houses have multiplied tenfold since the second week in November. Other investors have taken what money they had left and fled-many, apparently, to the safety of bank accounts. As the stock market nosedived, U.S. mutual savings banks took in $275 million in November, their first inflow of funds after five straight months of net withdrawals.

This file is automatically generated by a robot program, so reader's discretion is required.