Pangs of Pessimism

"Let's call this an average year -- but the best average year we've ever had." With this wry preface, Chairman Roger Blough last week announced that U.S. Steel sales of $1,187,554,615 for the first three months of 1960 had set a first-quarter record, disclosed that Big Steel's output (94.1% of capacity) had set a record for any quarter.

Blough's words were a pointed comment on the gloomy state of mind of many U.S. businessmen, though of course Steel's first quarter reflected pent-up buyer demands after 1959's nearly 17-week-long strike. But for many other companies, business had never been so good -- or at least, so big. With first-quarter reports from some 400 of the biggest U.S. companies in by last week, earnings on the average were up 6%. Seldom had there been so much discontent with good news, or such readiness to emphasize the weak spots. On the day Big Steel announced its gains, its stock dropped 1 1/2 to hit a new 1960 low. A day later, General Motors reported first-quarter sales of $3.657,972,071, a record for any quarter in its history, with profits of $324 million. But G.M. stock only held even, dropped 1/4 by week's end. After American Motors announced record March quarter net profits of $14 million, with earnings of 80-c- (up from 70-c- a year ago), the stock promptly fell off i-L-. Wall Street's explanation: brokers had been counting on earnings up to $1 a share.

Part of businessmen's uneasy mood could be traced to a real cost squeeze that had turned a higher gross into a smaller net for many a company. Chrysler, despite a sharp rise in sales ($925.8 million v. $690.5 million in 1959) reported a first-quarter earnings decline of 28% ($1.25 a share v. $1.75). There was also doubt about whether the economy was going to sustain its present pace. Manufacturers' new orders in March dropped $500 million under the previous month, lagged behind shipments.

On the bright side was a McGraw-Hill survey taken last month, after many businessmen had tempered their overly optimistic view of 1960. It still showed that capital outlays will rise 16% this year to a record $37.9 billion. This was 6% more than outlay plans made last fall, indicating that pessimism had not yet affected expansion, that management was often more sanguine than investors.

But the stock market was suffering the pangs of disappointment and uncertainty, and waited for a sure sign of the economy's course. Monthly trading on the New York Stock Exchange slacked until volume hit an eight-month low. Despite sporadic rallies, each day the market closed lower than the day before. At week's end the Dow-Jones industrial average was off 14.72 points, closed at 601.70, only a shade above the year's low point.

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