Nervous Retreat

WALL STREET Nervous Retreat "We're in a wartime economy," said Chairman William McChesney Martin of the Federal Reserve Board last week.

He warned Congress that the pressures generated by conflict in Asia may soon require stronger action against inflation, including "new machinery" to restrain wages and prices. Almost at the same hour, Chairman Louis B. Lundborg of the Bank of America urged in a Manhattan talk that the Reserve Board impose wider credit controls to prevent "distortions in the economy."

Such concerns--and the ominous realities behind them--have driven stock prices into a nervous retreat since the beginning of 1968, despite the evident strength of the private sector of the U.S. economy. From its Jan. 2 high of 908.92, the Dow-Jones index of 30 blue-chip industrial stocks on the New York Stock Exchange has fallen by 8%, or 72.58 points, inflicting a loss in value of $9 billion on investors. Along the way, the 30 industrials set a doleful 40-year record by falling for twelve trading days in a row. Last week the index slumped to 831.77, an eleven-month low, before finally rallying to close at 836.34.

Mood Indigo. Though the Dow-Jones index is often derided as a faulty barometer of market performance, broader indexes of stock prices only echo its mood indigo. Standard & Poor's index of 500 stocks, the New York Stock Exchange's index of all 1,245 of its common stocks, and the American Stock Exchange's index of its 1,200 stocks and warrants have also dropped by at least 6%.

Part of the decline is merely overdue reaction to last year's burst of speculation (TIME, Nov. 17). But some analysts maintain that Wall Street has reached the brink of a bear market.

One indication is heavy losses among such recent market favorites as conglomerate, computer, office-equipment and leisure-activity stocks. From their 1967-68 peaks, Polaroid has fallen 26%, Gulf & Western and Teledyne 27%, ITT 28%, Control Data 29%, Itek 36%, Ling-Temco-Vought 40%, and Fairchild Camera 46%. Such losses have created particular strains among performance-oriented mutual funds, which concentrate on plunging in shares they think will rise swiftly. Lately, some "gogo" funds have been trying to unload their tarnished glamour shares, but encountered trouble finding buyers at acceptable prices.

A Need for Heroes. In their endless quest for stocks with a growth future, many brokers are turning to companies in such fields as leasing and domestic travel. Others favor such overlooked performers as banks and utilities, whose stock prices have remained mired while their profits climbed. Says Meyer Berman of Manhattan's Scheinman, Hochslin & Trotta: "There will be new he roes because the stock market needs heroes."

As for Wall Street's effort to cure its internal malaise--a glut of paper work that has snarled order processing and stock transfers--there was a bit of cheer. President Robert W. Haack of the N.Y.S.E. reported that four weeks of shortened trading hours have erased a considerable part of the backlog. Since Jan. 22, when the markets began closing at 2 p.m., an hour and a half earlier than usual, average trading volume on the Big Board has dropped to 10.2 million shares as against 12.8 million during the first three weeks of the year.

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