The Squeeze of '79

Even by the standards of the 1970s, the decade of recurring recession, relentless inflation and repeated runs on the no longer almighty dollar, it was a wild week. For some time, Americans had seemed able to ignore or nimbly thrust out of mind repeated symptoms of their out-of-joint economy, like alarming new price rises and further drubbings of the greenback abroad. But last week those distant, or perhaps too familiar, woes hit home, and hard, in a burst of financial hysteria that engulfed markets, speculators and ordinary investors big and small from Wall Street to Main Street.

On the floor of the New York Stock Exchange, where prices had generally been climbing through the year, brokers were swept up in a selling wave that caused pandemonium on Wall Street and twinges of fear throughout the country. In just five days, the market dive left investors with some $55 billion in paper losses and sent the Dow Jones industrial average plunging a total of 58.62 points to a week's close of 838.99. In terms of points, that was the Dow's second steepest one-week decline ever; during the week of Oct. 16, 1978, when prices were hammered by news of a sharply falling dollar abroad and worsening inflation at home, the Dow sank by a half point more, but on a much smaller volume of trading. The number of shares that changed hands last week, some 250 million, was the largest in Big Board history.

On Tuesday alone, the Dow dropped a breathtaking 26.45 points, its worst single-session loss since January 1974, when the last recession was pushing the nation into its steepest economic slide since the Great Depression. The very next day, as worried investors around the country hurried to unload their falling stocks, a record 81.6 million shares were sold off on the Big Board in such a headlong rush that the ticker tape reporting transactions and prices fell as much as 63 minutes behind the pace of trading. "This thing is feeding on itself," fretted William LeFevre, vice president at one Wall Street brokerage house. "Each decline triggers another batch of people who have to sell."

In other markets, there were similar cries of pain as huge price gyrations roiled trading in everything from metals and corporate bonds to livestock and even futures contracts for wheat and soybeans. In his office just off Chicago's LaSalle Street, the heart of the Windy City's financial district, Bond Trader Colin MacDonald paused long enough from juggling the phones on his Government securities desk to complain to a reporter that "the market's in a shambles. Before this is over, there'll be enough resignations from wiped-out traders to fill the Yellow Pages."

On the Chicago Mercantile Exchange, a veteran trader emerged from a day of trying to cope with roller-coaster price changes in the pit where live cattle are traded to exclaim, "I've never experienced anything like this in my life!" In Florida, where the action this year in condominiums has been hotter than the summer sun, mortgage bankers felt a sudden chill. Said Charles Stuzin, head of a Miami savings and loan association: "People are asking, 'What's going to happen tomorrow?' Everything has moved so quickly, no one can make any plans."