Wall Street: One Hectic Week

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No such rationalizing explains why the market has been steadily declining for five months, or why it has dropped so precipitously in the past two weeks. Plainly, there has been a significant shift in the basic attitude of U.S. investors. Edmund Tabell, vice president of Manhattan's Walston & Co., whose crystal ball is one of the clearest on Wall Street, was confident that he knew what had brought about the change. Said he: "The market is selling off because we have been paying too much for stocks as a hedge against inflation." Market analysts, economists and businessmen of all political persuasions agree that one event made a falling market suddenly plunge deeper and faster: John F. Kennedy's crackdown on the steelmakers who wanted to raise their prices. Kennedy's power play drove home to U.S.

investors, as nothing else has, the fact that the momentum of inflation has been stopped—and that the Administration is committed to keep it that way. All the debate about increased foreign competition, about gold outflow, and the narrowing of profit margins that the steel hassle aroused made it clear to the nation that the green years of automatic growth, plump profits and U.S. dominance of world business were at least temporarily ended.

Besides wiping out the inflationary habit of thought that had kept the stock market buoyed up, Kennedy's victory over Big Steel profoundly undercut the business community's confidence in the future, provoked widespread fears that the President intended to fasten de facto controls on prices and profits. The intensity of this feeling was reflected this week at the annual meeting of the American Iron and Steel Institute in Manhattan, where Pittsburgh Steel's President Allison R. Maxwell Jr. bitterly accused Kennedy of heading "toward a form of socialism in which the pretense of private property is retained while, in fact, prices, wages, production and distribution are dictated by bureaucrats." When Allison finished his speech, the 1,000 assembled steelmen gave him a standing ovation.

The Growth Cult. Market analysts, who rarely agree on anything, not only joined in ascribing the market's latest downfall to the steel crisis, but were unanimous on another point: over the past few years stock prices have been driven to unrealistic highs by the ordinary investor's infatuated belief in capital growth. In the single-minded pursuit of growth, declares David L. Babson of Boston's David L. Babson Management, investors "have been borrowing against the future.' Echoed Economist John Langum of Chicago's Business Research Corp.: "The stock market has for some two to three years been discounting not only the future but the Hereafter as well."