Nice Surprise On Wall Street

Stocks suddenly surge after more than a year of gloom

Brokers know all about Wall Street's legendary selling panics, but whoever heard of a buying panic? That is precisely what swept the New York Stock Exchange late last week. In two incredible days of financial hebephrenia, the cavernous trading room echoed with delirious shouts and yells so loud that it was hard for brokers to talk to one another. After 15 months of steadily slumping prices, the market had taken a sudden and unexpected U-turn, sending short sellers, who make profits by betting on continued declines in stock prices, running for cover.

On Thursday the Dow Jones Industrials climbed nine points, then surged by almost 20 on Friday, to close at 795, the highest since early January. By day's end, 52.3 million shares, worth $1.4 billion, had changed hands--both records. The previous high volume was 44 million shares on Feb. 20, 1976, and hopeful analysts were wondering whether the 1977-78 bear market had finally ended.

Stocks have been long overdue for a recovery. From almost the moment that Jimmy Carter moved into the White House, investors began moving out of the market. As the slide has continued, Wall Street has begun to look more and more like a bargain basement just waiting for shoppers. Last week they came pouring in, driven by random pieces of upbeat economic news (a slowdown in the growth of the money supply, a hefty increase in industrial output during March, a firming dollar overseas) as well as a juicy--though unfounded--rumor that Exxon Corp. had struck oil off the New Jersey coastline. In addition, there were reports that President Carter was considering reducing the size of his proposed tax cut, a move that would tend to counter inflation. Buyers also came back because of the Street's herd instinct. As one broker put it, investors saw the gathering momentum and the market's rising prices and said, "Oh God, it's getting away from us"--and rushed in before prices rose further.

All of those factors also drew in money from abroad. Foreigners were particularly intrigued by the oil-strike rumor, which suggested to them that the U.S.'s energy problems would be eased and the dollar would regain its stature. With some $400 billion in greenbacks now in foreign hands, an overseas rush to Wall Street would send stocks up sharply. Whatever happens next, the market's behavior last week ought to give Washington some idea of how investors are prepared to respond if the nation ever gets a sensible energy program and an effective policy to fight inflation and prop the dollar.

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