The Fears of Wall Street

President Truman had thundered about the "privileged Wall Street gluttons." The "gluttons" last week looked more like frightened rabbits. As the G.O.P. defeat* became certain early Wednesday, panicky stockholders jammed the wires with orders to brokers to sell. By the time the New York Stock Exchange opened at 10 a.m., sell orders so far exceeded buy orders that initial transactions on many key stocks were delayed for as long as three hours.

When markets were finally made, prices were down anywhere from 2 to 6 points. General Motors, which had closed at 65 3/4 the day before election, opened Wednesday at 61. U.S. Steel opened down 4 on a block of 15,000 shares. In the avalanche of selling (3,230,000 shares for the day), the Dow-Jones industrial average dropped 7.3 points, the sharpest break since the crash of the bull market in 1946.

Professional traders, who scoffingly described the selling by small stockholders as "emotional" and "hysterical," stepped up their buying Thursday morning. The market bounced up, recovering a fourth of its losses. But on Friday, in the broadest session on record (out of 1,415 stocks listed, 1,174 were traded), the averages went down again. By week's end, the Dow-Jones industrial average was down to 178.94, a drop of 10.82, wiping out the gains of the pre-election rally of the last five weeks. It was the market's worst four days since the spring of 1940 (when the Nazis rolled over the Low Countries).

On the other hand, commodity futures markets, which had been sagging for weeks, went up. Cotton jumped $3.85 a bale, wheat as much as 4 1/4-c- a bushel, and butter, eggs, etc. all made sizable gains in the expectation that the Democratic victory meant a continuation, perhaps for years, of high support levels for crops.

The Bark. There was no doubt that the stock market, which had been as certain as everyone else of a G.O.P. victory, was panicked by all the Democratic talk of stand-by price controls, an excess-profits tax, repeal of the Taft-Hartley Act, and demands for wage boosts from tough, confident unions backed by a labor-minded Administration (see NATIONAL AFFAIRS). But calmer businessmen recalled that it was a Democratic Congress which had let OPA die, that President Truman had approved the repeal of the wartime excess-profits tax in 1945, and that wage boosts were bound to come anyway, as long as business and profits were so good. In short, they hoped that the Democratic bark would be worse than Congress' bite.

The farther businessmen were from Wall Street, the less they were upset by the election. The Wall Street Journal surveyed the U.S. and found that no one was canceling expansion plans or retrenching. And many businessmen were less worried about price controls--even stand-by ones --than the fact that buyers were shying away from many items at present prices--and prices would have to come down anyway.

Small Bite? In short, many businessmen flatly disagreed with Wall Street's interpretation of what was going to happen. Some of them:

P: Charles E. Wilson, president of General Motors (which at week's end declared a year-end dividend of $2 per common share v. only 75-c- last year), could not see how "the results of the election will have any effect on the automobile business."

P: Edward Eagle Brown, board chairman of Chicago's First National Bank and a Democrat, was even more optimistic: he expected "some temporary hesitation in capital expenditures and expansion programs, but this, in the present situation, will be beneficial rather than harmful . . . Anyway, the world isn't coming to an end."

P: Earl Bunting, managing director of the National Association of Manufacturers, hoped that the election results might even help the N.A.M. in the long run. Said he: "We are going to reverse our stand from being 'against' things to being 'for' them. Our phrase 'we are unalterably opposed to' is out. Who cares what we oppose? They want to know what we propose."

P: In Los Angeles, A. J. Gock, board chairman of the Bank of America, angrily snorted: "Why the hell did everyone try to dump his stock the next day? Certainly manufacturers aren't closing down their plants."

New York's Republican Herald Tribune was also positive that Wall Street was wrong. "We certainly cannot go along," it said, "with those who see disaster to free enterprise in another four years of Democratic rule. Profits in the last two years have been high. With full employment and a great market for the products of American industry ... a share in American industry is a better bargain than ever, as well as a good investment."

* The Stock Exchange flag, which was flown at half-mast on Wednesday, was not in mourning for the G.O.P. It had been lowered in memory of a deceased member.

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