Fodder for Bulls

At last Wall Street's bulls found something to feed on. The Dow-Jones average, which had been floundering all summer, jumped 35 points following the Cuban crisis, and climbed another 11.55 points last week to close at 616.13. Chart watchers were particularly cheered that the market cracked 616, which to them had seemed a crucial and formidable number because the Dow-Jones had not closed so high since just before Blue Monday, May 28.

Blue Chips Up. Market professionals particularly liked the quality of the stocks that paced last week's rise. Gains of three points or more were made by blue chips such as A.T. & T., Allied Chemical, International Nickel, Union Carbide, Westinghouse Electric. "The market has the best leadership you can have," said Gerald M. Loeb, partner in E. F. Hutton & Co. Bradbury Thurlow, of Winslow, Cohu & Stetson, figured that the upward swing "is a little too big for a false start." He calls the current market a "baby bull," and expects that it will get added nourishment when the mutual funds, which have been hoarding their cash on the sidelines, begin to buy. "They follow the public," he says. "They'll buy blue chips because many of them have been badly burned on growth stocks."

But there were still quite a few bears around, who found things to be bearish about. Since 1900, they argue, the average loss during bear markets has been 42% from the previous high on the Dow-Jones: thus far, the current market has dropped 27%, from its December high of 734 to the June 26 low of 535. The traditional pattern of long-term declines, says Analyst Edmund Tabell, is drop-recovery-drop. The current market, Tabell argues, is a bear that is in its first recovery stage and due for another drop. He expects the Dow-Jones average of industrials to climb into the 650 to 680 range early next year, then begin to lose ground again, and not reach any new highs much before 1964.

Taxes Down? History may be on the side of the bears, but current events seem to be going for the bulls. The feeling is now common that the recession widely predicted for early next year will be mild and brief--and has already been discounted by stock traders. The easing of the Cuban crisis enhances the chances of a tax cut next year, which might well set off an economic upsurge. Walter Heller, the chief of President Kennedy's Council of Economic Advisers, said last week: "Tax reduction and tax reform are at the top of the agenda."

Even without a tax cut, businessmen plan to increase their capital spending by 3% next year, to a bit more than $38 billion, according to a survey by McGraw-Hill. Said its Economist Douglas Greenwald: "This just about eliminates the possibility of any recession next year, but it is discouraging that the economy's growth will continue to be small."

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