With so much bad news bedeviling the stock market, the big surprise may be that stocks haven't plunged even more steeply.
The market yesterday hit a new closing low for the year, with the Dow Jones industrial average finishing the day at 761.69, down nearly 70 points from the start of 1978. But there seems to be resistance to a further substantial slide.
"We don't seem to have much panic selling and there's even some nibbling of stocks on the buy side," commented Jacques S. Therriot, first vice president for trading at Smith Barney, Harris Upham. "There's also a lot of cash around and some of it is being committed - but not in any activist fashion yet," he added.
"One of the largest positives is that there is so much negativism," Therriot abserved. "So many people feel we are bordering on the end of Western civilization. And when you get an attitude like that which permeates thinking . I construe that as a positive simply because those people are wrong. History shows things go to extremes. And the more rabid the pessimism gets, the nearer you are to some turnaround."
Just to catalogue some of the market's current woes:
The coal strike which has gone on so many weeks that it is now beginning to shut factories and threatens to close down entire industries such as automobiles if prolonged much longer.
Weakening consumer demand as reflected in both auto sales figures and January retail sales.
Some early-warning indicators which are flashing a recession or at least abnormally slow growth later in 1978. January Industrial output registered the sharpest decline since March 1975, the Federal Reserve Board reported yesterday.
A more worrisome inflation outlook as reflected in recent price surges for crude materials and intermediate-stage processed goods.
The prospect of greater oil imports in the first quarter because of the coal strike, an enlarged trade deficit as a consequence, and a weaker dollar. In fact, the dollar this week already is under a new wave of speculative attacks in the foreign exchange markets.
A seemingly pervasive lack of investor confidence in the Carter administration's ability to get anything accomplished, exemplified by the stalemate on energy legislation and the immediate congressional resistance to the administration's take-it-or-leave-it tax cut and "reform" package.
And vague but growing fears of some cataclysmic collapse of the world financial system.
At the opening session of a two-day Conference Board meeting on the financial outlook yesterday, the pessimism was palpable.
"Rarely have so many common stocks appeared so reasonable relative to the assets, profits and dividends of the issuing companies - by historic standards, of course," noted Harold B. Ehrlich, chairman of Bernstein-Macaulay Inc., a financial advisery firm."At the same time, however, rarely have serious observers of Western society been more troubled by uncertainties during a period of relative peace and prosperity, such as we are experiencing," he added.
Ehrlich predicted that "if the weakness in our financial markets continues much longer, the confidence of consumers and businessmen could become depressed enough to touch off a deflationary spiral" which, with accompanying increased unemployment, "could spark widespread demands for a change in our economic system."
However, the Bernstein-Macawlay chief said he personally believes the market will bottom with the dollar - which could happen soon - but would "not ensure another bull spree shortly thereafter."
Newton F. Zinder, E. F. Hutton vice president and market analyst, said in a separate interview, "The market has begun a bottoming-out process - but it will be a rather protracted one, probably extending through the winter and into spring."
"There is not much downside risk, but not a great deal of upside potential either," Zinder added. "We might get a number of aborted rallies and aborted declines - a mirror image of 1976 when the market fluctuated between 950 and 1,000 on the Dow. This time the range will probably be 730 to 740 on the low side and 790 to 800 at the top."
White, Weld senior vice president and chief economist A. Gary Shilling, one of the few forecasters who expects inflation to decline in 1978, also noted the many negatives plaguing the market but said the pendulum could soon swing the other way.
"Right now you can point to a dozen problems, all of hem telling you to stay out of the market indefinitely," Shilling said. "But if you look at the situation in Great Britain, and what the stock market has done there in the last eight months, it shows you can go from pessimism to raging optimism with no real solution to fundamental problems. Everybody just looks at things differently."
"Experience indicates that when everybody is convinced to never invest thats the time when things can switch in a hurry."
But Shilling said he would not climb out very far on a limb predicting such a switch. And for the time being, most investors probably won't either.