The Bulls Break Through

It took a lot of huffing and puffing, as well as some slipping and sliding, but last week the stock market reached the peak it set 21 months ago, and then climbed to an alltime high.

Last Thursday, Sept. 5, the Dow-Jones average of 30 key industrial stocks closed at 737.98, overtaking its previous high of 734.91 set on Dec. 13, 1961. Even though by week's end it dipped to 735.37, there was no flag ging of buyer interest -- daily volume totaled 7,160,000 shares, the largest in 16 months.

In all, 224 issues on the New York Stock Exchange reached historic highs. They included CBS (741), Singer (83 1/8), Sears, Roebuck (98), Xerox (29 3/4). One of the best gainers of all was Control Data, the young and profit able Minneapolis computer maker that is often called the little man's IBM; its stock price has risen 217% this year to last week's close at 95. (Six years ago it came out at $1 a share, has since split 3-for-l.)

Stronger Base. The stock market thus has plainly found its legs again, and its self-confidence. From the high it set in December 1961, it had fallen off gradually, and then abruptly in the near-panic of Blue Monday, May 28, 1962, before hitting bottom a month later at 535.76. Any courageous soul who bought one share of each of the 30 stocks in the Dow-Jones industrial average on Blue Monday would have found his $1,727 investment worth $2,187 last week.

Most Wall Streeters doubt that stocks are now riding for another fall. With the gift of 20/20 hindsight, they see that the 1961 market involved too much speculative buying by people who went deeply in debt to grab up stocks with more futuristic "glamour" than current earnings. This year's market leaders are blue-chip companies with strong earnings to back up their stock prices. Dow-Jones stocks are selling at 18.8 times per-share earnings, v. 22.9 times earnings in late 1961. The easily panicked amateur buyers, who deal in small lots, account for only 15.8% of trading, compared with 20.8% two years ago. "This is a thoroughly professional market," says Vice President Robert B. Ritter of Wall Street's Maxwell, Franklin & Co.

Out of favor with the professionals are many of yesterday's overheated stocks. Among them: tobaccos, vending machines, cosmetics, and some electronics and office equipment issues. In favor now are autos, chemicals, airlines, oils, appliances and life and casualty insurance companies.

Higher Dividends. Behind the market's rebound is the steady flow of better corporate earnings reports, dividend increases and generally good business news. The Commerce Department reported last week that manufacturers' new orders rose 1% during July, total business sales gained 2% to a record $70.7 billion, and in August, outlays for new construction increased 4% . Capital spending plans of business were down, but only slightly, to $39.1 billion for the year, still 5% more than last year.

Prospects of continued business expansion, plus the possibility of a tax cut next year, bring out the bulls. William LaTourette, research partner of Shearson, Hammill & Co., expects the Dow-Jones shares to rise to 20 times earnings. So do many other Wall Streeters. That means there is a good chance of the Dow-Jones reaching 800 by the end of this year or early in 1964.

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