"Inflation!"

Warren Gamaliel Harding was the only U. S. President of the last 40 years whose election failed to evoke a courtesy advance from the stockmarket. Reason: in 1920 World War I's prosperity was cracking up. But in 1924 the market greeted the reelection of economic rain maker Calvin Coolidge by rising 1.22 points. In 1928 it roared welcome to Herbert Hoover by rising 3.1 points. In 1932, Wall Street stopped its decline the morning after Franklin Roosevelt's election, giving him an .18-point vote of confidence four months before he closed the banks. Even after business had decided that Franklin Roosevelt was its enemy, the market buried the hatchet and rose a generous 3.41 points in 1936. It was a post-election custom.

Last week Wall Street went back to work with its worst morning-after since the Great Crash. It had heard of many a partnership agreement and penthouse lease written to expire Nov. 6; it had even heard that if Roosevelt were reelected, the New York Stock Exchange would not reopen at all. When it did, the tape had scarcely strength to limp from the ticker. For a full day it looked as though the Third Term Candidate would take his place beside Warren G. Harding.

The bears did not get going at once. Reason: they were led by out-of-town wise guys who had picked Commonwealth & Southern (price: just under $2 a share) as the cheapest bet on Willkie. Day after election, it took two hours to hear from enough of these $100 ashot gamblers to make a market in the stock. By noon, 35,000 shares had been gathered, were dumped, drove the price down 50-c-. By closing time, total trading in C. & S. had reached 42,300 shares, and its price ($1) was a five-month low.

C. & S. was not the only stock to suffer. The Standard Statistics' average of utility common stocks dropped 3.6 points (6%) --the worst day for utilities since November 1937. U. S. Steel, barometer of general confidence, lost 2 1/8 points; the industrials average lost 3.23 points. The market in Stock Exchange seats dropped $11,000.

Next day, the Street's worst fears were confirmed. The New Deal's most conservative spokesman, anti-spending Treasurer Henry Morgenthau Jr., held a press conference. Feeling so chipper that he overrode the cautious warnings of his Under Secretary, Daniel W. ("Watchdog") Bell, the Secretary said he would have to ask Congress to up the debt limit by $15-20,000,000,000. Said Morgenthau: "We have just begun to rearm."

This heady prospect turned the market's slump into a near panic. But it was a panic in reverse. Prices turned completely around, rose as much as 8 points. Not since the outbreak of World War II had the market so thoroughly outsmarted itself (TIME, Sept. 11, 1939). In a 2,080,000 share day, its busiest in nearly six months, the Big Board pushed the Dow-Jones industrials average up 5.77 points.

Apart from the coverings of shorts, there were plenty of reasons in logic for the market's turnabout. General Motors was selling more cars than in any previous autumn; U. S. Steel's shipments were close to 1929's; power sales, new construction, durable goods activity, consumer income were all rounding a curve that pointed to new industrial highs. But this had been true for days and weeks, while the market lagged. Now market commentators reasoned from the Morgenthau statement that the long-dreaded day of inflation was at hand.

Symptoms of inflation there were--enough to start a stampede from cash to stocks and commodities. One such stampede led to gold mining stocks. Another led to the unlikeliest commodities: wheat (up 3-c- a bushel) and cotton (up $1 a bale). Market-wise, the outlook for both commodities is as pallid as it well can be.

But not all last week's phenomena were inflationary. Many were simply bullish in the old-fashioned way. Samples: 1) heavy industry stocks like Bethlehem Steel, Union Carbide were all over the tape; 2) consumer stocks like Paramount, International Harvester, Chrysler set a good pace; 3) even the average of railroad common stocks was carried up 1.07 points.

Meanwhile the bond market, which is supposed to go down with other fixed obligations in an inflation, went up too. For part of this, Secretary Morgenthau could also be held responsible. He announced that the next Congress would be asked for a long-overdue reform: a bill to end the issuance of tax-exempt bonds by Federal, State and municipal governments. Such bonds already outstanding naturally rose. But nothing Morgenthau said could explain the parallel advance in high-grade utility bonds, the average of which reached no for the first time in its history. This was demand of a distinctly hard-money character.

Upshot of the post-election market was that security-seekers will have to pay higher prices for fixed, safe incomes. The market was belatedly reacting to the rearmament boom.

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