By: Wanna Otelma on Giovedì 17 Ottobre 2002 15:46
Per coloro che fossero interessati ...
Thursday, October 17, 2002
1962 Rally Withstood Nuke Scare
BY CRAIG SHAW
INVESTOR'S BUSINESS DAILY
This year wasn't the first time the stock market faced the double whammy of corporate scandal and the threat of war.
The same thing happened 40 years ago. And out of that crisis sprang a major bull market.
The economy was chugging along in 1962, with GDP growth greater than 4%. But early that year the Securities and Exchange Commission announced an investigation into the sales tactics of the mutual fund industry. In April, President Kennedy fanned the flames by branding steel firms "irresponsible" for raising prices.
From their March 1962 peak, the Dow industrials tumbled 28% to their lowest level in nearly four years. IBM (IBM) fell 50%, mirroring the declines of today's techs.
The index struck bottom June 25, but reversed to close near the top of its intraday range for a small loss (point 1 on accompanying image). Volume hit 900,000 shares among the 30 Dow stocks.
That turned out to be the first day of a new rally. Three days later, the Dow gapped up 3.8% on heavier trade than the day before (point 2). Back then, a 1% gain was sufficient for a follow-through day.
The Dow surged 19% by August, climbing above its 50-day moving average. But it began a correction before reaching its 200-day line.
The night of Oct. 22, Kennedy told the nation Soviet missiles had been discovered in Cuba. He ordered a naval blockade. The Dow was already on a five-day losing streak. It dropped another 1.9% the morning after his speech on surging trade (point 3).
Russian ships steamed toward Cuba. The U.S. military went on nuclear alert. It looked like the Dow would test its June lows.
But on Oct. 24, as U.S. and Soviet leaders squared off on the floor of the U.N., the Dow rallied 3.3% on massive trade (point 4). It marked a new follow-through day on Oct. 29 (point 5), rising 1.8% on 31% faster trade.
The crisis behind it, the market boomed. The Dow advanced from 550 that October to an unprecedented 1000 in January 1966, an 82% gain. Even Kennedy's 1963 assassination couldn't derail the bull market.
Airlines and auto makers shared the spoils. Chrysler cleared a cup-with-handle base in October 1962, advancing 325% in just under two years. Northwest Airlines broke out in January 1963. It gained a whopping 1,163% in 41 months.
As the bull roared on, aerospace, color television and semiconductor stocks took center stage. Big winners included chipmaking pioneer Fairchild Semiconductor (FCS) and department store chain S.S. Kresge Co.