Stocks Mark Time; Dow Off 300 for Week
The stock market, exhausted by its most turbulent and terrifying week in six decades, closed two hours early Friday virtually where it began the day.
The Dow Jones industrial average rose a bare 0.33 points, closing at 1,950.76, while broader measures of the market were down slightly. Volume on the New York Stock Exchange was 245.6 million shares, bringing the total number of shares traded this week to 1.3 billion, a figure that just two weeks ago would have been unthinkable.
Thus ended a week that saw a stunning collapse on Monday, then a two-day rally and another steep drop Thursday, a cycle of crash and rebound compressed into 100 hours of frenzied trading that left Wall Street spent.
Lessons Studied
At the end of the day Friday, with the Dow industrial average off 300 points for the week, the financial community began to ponder the lessons of its greatest crisis since October, 1929: the dangers of panic and inexperience, the uncontrollable velocity of a system driven by computers rather than men and the cost of a government unwilling or unable to confront the nation’s massive trade and budget deficits.
David S. Ruder, chairman of the Securities and Exchange Commission, welcomed the relative calm of the markets on Friday as a sign that “we have seen the worst.”
Other analysts, their accustomed confidence shaken by the week’s events, were less willing to predict that the market has regained its equilibrium. There was, however, general relief that the market “meltdown” had, for the time being at least, been contained on Wall Street and had not spread to the general economy.
There was encouraging news from Washington: Consumer prices rose only 0.2% in September and the economy grew at a healthy 3.8% annual pace in the second quarter. President Reagan announced that Administration officials would meet with congressional leaders on Monday to begin discussions on controlling the budget and trade deficits.
Yet stock exchanges in Europe and Japan continued to take a battering from investors, indicating that the global financial markets had not recovered from Monday’s 508-point shock and that more bad news may await when markets reopen after the weekend.
“I really don’t know how to cope with it,” said Michael Metz, a market analyst with the Wall Street firm Oppenheimer & Co. “A great number of serious innocent investors have been crucified by this action. We’ve learned that the free market is merciless, and rather vicious.”
Wall Street apparently was not pacified by Reagan’s assurances in a televised press conference Thursday night that despite the stock market tumult, the nation’s economy remains fundamentally sound.
“This is purely a stock market thing and there are no indicators out there of recession or hard times at all,” Reagan said.
Leadership Seen Lacking
“I and many people found the President difficult to take seriously,” said Hank Greenleaf, president of HT Investors, a Providence, R. I., pension fund management firm. “You would hope there’d be a sign of strong leadership, that he comprehends events and is willing to act accordingly. His presentation last night did little to lend confidence.”
Added Alan Ackerman, senior vice president at Gruntal & Co.: “I think President Reagan did not come to the point. The fact is that Wall Street and world markets are waiting to hear about cuts in defense spending and specific comments about taxes.”
Ackerman said Reagan’s comments did nothing to reassure him that the Administration has a plan for coping with the budget deficit. “There has been just too much rhetoric, too much theater for TV out of Washington,” he said.
On Wall Street, the unprecedented trading volume this week strained the computerized system for processing market transactions almost to the breaking point. Trading, curtailed by two hours Friday, will be shortened again Monday and Tuesday. Back-office workers at the major exchanges and brokerage houses will work through the weekend to record the crush of buy and sell orders received during the week.
Volume Put in Perspective
To give the volume figures some perspective: the 1.3 billion shares traded on the New York Stock Exchange this week are more than the total number of shares traded in all of 1964.
“It was more than incredible. It’s unthinkable,” said David J. Rudnet, a large block trader for the New York Stock Exchange. “The paper work is keeping us here until 11 or 12 at night, and it will be a couple of days before we sort it all out. There will be a backlog for a few weeks.”
On the New York Stock Exchange Friday, prices for 502 stocks rose, 883 fell and 206 were unchanged. The Big Board composite index fell 0.23 to close at 139.22, a 20-point drop for the week.
Prices were off moderately on the American Stock Exchange and in the over-the-counter markets Friday. The Standard & Poor’s composite index was virtually unchanged.
In all, the massive sell-off on the nation’s stock exchanges this week slashed the value of investors’ holdings by $368 billion, according to figures compiled by Wilshire Associates of Santa Monica.
Tokyo Index Plunges
In Tokyo, home of the world’s largest stock exchange, the key 225-share Nikkei stock average plunged 1,203.23 points Friday--its second-largest one-day decline--to close at 23,201.22 points.
Prices also fell sharply in London Stock Exchange trading, reflecting fears about Reagan’s comments on the economy and Wall Street’s tepid reaction. The Financial Times-Stock Exchange 100-share index finished down 38 points to 1,795.2, after having been down 86 points earlier in the session. The index suffered a 110.6-point loss on Thursday.
Market analysts were more reluctant than usual to offer predictions about what may happen when markets reopen Monday. “I do think we’re coming back into a period of stability,” Greenleaf said. “But to the extent any of us were feeling cocky about our abilities, I think we’ve been humbled by recent events.”
Greenleaf said the week demonstrated that the “financial system can withstand the shock of losing so much money and the massive volume. The resiliency of the financial markets was proved.”
He said his firm’s clients survived the week in decent shape, even though the value of their accounts declined substantially. “On a relative basis, we look pretty good. On a absolute basis, there’s blood on our shoes.”
Sees Bigger Danger
Oppenheimer’s Metz saw a larger danger in the Wall Street panic of 1987 than lost investments and a few lost jobs. He fears that the market’s violent swings will frighten ordinary investors away from the market, leaving it a casino open only to professional arbitragers with their high-speed computers who trade stocks as if they were commodities rather than the capital underpinning American corporations.
Savings and investment are already too low in this country, Metz said. “And the public is going to be reluctant to save and invest if they feel their savings are going to be victimized by thieves or crapshooters.”
Staff writer Eileen V. Quigley in New York contributed to this story.
