Two-Day Wonder

For a few days last week, Wall Street' brokers thought that the long-ailing stock market had got the tonic it needed. On th first day after the reduction in margin requirements from 75% to 50% (TIME, Apri 4), trading on the New York Stock Ex change hit 1,800,000 shares and the Dow Jones industrial averages jumped 2.4 points. It was the biggest volume since November, best gain since October.

But the market's cheer was short-lived After a second 1,800,000-share day anc a much smaller rise, trading ebbed off and stocks sagged the next two days At week's end they had lost most of their gains.

Although the new margin rule, in effect tripled the amount of borrowed money which could be used to buy stocks,* it did not bring many new customers into the market. Most of the stepped-up business was done by seasoned traders who were merely using their additional credit.

The fact was that a margin cut alone was not enough to send the market up; a margin cut from 100% to 75% had had little effect in February 1947. High taxes still kept many investors short of cash and those with cash were holding off until they were surer about the extent of the current business recession.

Furthermore, brokers' own commission rates, now the highest in history, might be an added drag on the market. In a dull market, profits of even a single point had been hard to make. When made, around a third of a point of the profit on a 100-share transaction in a cheap ($10) stock went for buying & selling commissions.

*Under the old 75% rule, an investor with $1,000 could buy $1,333 worth of stock, borrowing the balance from his broker at 21/2% to 4H%. Under the new rule, his $1,000 could buy $2,000 worth of stock.

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