Wall Street: The Professionals Take Over

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At the height of Wall Street's trading frenzy last week, Chase Manhattan Bank Economist William Butler told a top New York broker: "Well, I guess this is a healthy readjustment." Snapped the broker: "One more healthy readjustment like this and I'll go through the window.''

Nobody went through the window, and few really went through the wringer. But the convulsion that swept the stock market cost millions of Americans dear in anticipated profits, and particularly the amateurs among "small investors" who put their money into the market at or near its peak and sold out at last week's low. Not since the dread year of 1929 had trading been so heavy (average daily volume: 10,000,000 shares) or the ticker tape lagged so late. Before the week was over, delays of an hour or more in the tape became routine, and one night the final Dow-Jones averages were not calculated until five hours after the market's 3:30 close.

The 21% Plunge. It began with a day that will rank with Wall Street's Black Tuesday of Oct. 29, 1929—Blue Monday, May 28, 1962. That morning, brokers were deluged with sell orders that had been piling up over the weekend from two sources: 1) small investors frightened by the previous week's break, and 2) investors who had borrowed from banks or brokerage houses to buy stocks that had faded, and who were now being ordered to put up more collateral. One of the few avowed buyers that day was penurious Billionaire Jean Paul Getty, who from London had ordered his brokers to pick up for him "40,000 or 50,000 shares" of oil company stock—Gulf, and his own Skelly, Tidewater, and Mission Development.

As the day wore on, selling panic buffeted the widely held blue chips: IBM fell 37½ to 361, Du Pont 12½ to 202½, A.T.&T. 11 to 100⅝. So irrepressible was Blue Monday's selling pressure that more than 4,000,000 shares changed hands in the final 30 minutes of trading, and the last transaction did not clear the ticker tape until 2½ hours after closing. In the second bleakest day in Wall Street's history, the Dow-Jones industrial index plunged 34.95 to 576.93—21% below its peak of last December.

Bargain Day. Surveying the debacle from the inner offices of brokerage houses, banks and mutual funds, the men who make markets decided that many stocks had touched bottom and now was the time to shop for blue-chip bargains. Monday night, Boston Investment Counselor Garfield Drew, the champion of the Odd Lots Theory (TIME, March 31, 1961), rushed out 4,500 telegrams urging purchases of such hard-hit issues as Polaroid, Xerox and American Machine & Foundry. On Wall Street, mighty Merrill Lynch, Pierce, Fenner & Smith sent out a "Buy Flash"; so did Paine, Webber, Jackson & Curtis, E. F. Hutton, Francis I. du Pont, and other influential brokerage houses. The long-distance wires hummed from Minneapolis, where the nation's biggest mutual fund group, Investors Diversified Services, was placing orders for $20 million worth of common stocks.