The Economy: The Day of the Little Bulls

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In many ways, President Johnson's anti-inflation package failed to wrap up answers to the nation's basic economic problems. But, for at least the short term, it provided a lot of ribbon, and Wall Street investors responded enthusiastically.

At last, the bulls returned to Wall Street. For the first time since June, investors got a rise out of the stock market on Monday—the Dow-Jones industrial index spurted 15 points for the best single-day gain in 15 months. At week's end the Dow-Jones had risen 39 points, to 814, regaining $25 billion in paper values. As if to celebrate, hundreds of Wall Streeters observed "Mexico in New York Week" by watching an open-air performance by Mexican folk dancers and a troupe of musicians aptly called Los Toritos—The Little Bulls.

Ease in the Squeeze. The market had been ripe for a rise. Its ninth major downswing in 20 years had dropped shares to their lowest levels, relative to earnings, since 1958. Dozens of giltedged stocks—among them G.M., Du Pont and Allied Chemical—were underpriced. Such a situation was tempting to the mutual funds, which have been waiting for the right moment to buy at bargain rates. Then, too, there was good news: the elections in Viet Nam; the decision by the U.S. to buttress Britain's pound with more credits; the prediction by G.M. that next year's car sales will reach 9,000,000.

All these portents helped, but what really gave the market its momentum was President Johnson's better-something-than-nothing moves to battle inflation, primarily suspending the 7% tax credit for business investment. Nobody knew precisely what benefits

Johnson's prescription would produce, but it did tranquilize that ineffable factor, investor psychology.

Support from the Club. Though many businessmen were miffed by Johnson's Indian-giver tactics on the 7% tax credit, his proposal was endorsed in testimony before Chairman Wilbur Mills's House Ways and Means Committee by three corporate chiefs: A.T. & T.'s Frederick Kappel, the Pennsylvania Railroad's Stuart Saunders and Campbell Soup's William Murphy. They agreed to testify under pressure. Commerce Secretary John Connor phoned Murphy, urged him to testify and to recruit other members of the President's "club" of business advisers to come to his aid.

Murphy got in touch with Kappel and Saunders, then saw the President in the White House, told him that if business was to be called on to make its sacrifice, then it was also high time for Johnson to cut spending and to speak up more bravely against inflationary wage increases.