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Anticipation of recession was scarier than the realization. When the production cuts finally started, the nation's mood gradually turned from nail-biting to cool appraisal. The quick shift in sentiment was clear on Wall Street, which for a change accurately reflected business opinion through 1957. In January and February, when the first gloom-sayers gave tongue, stocks tumbled 44 points to 454.82 on the Dow-Jones industrial average. Later, when it became apparent that the initial pessimism was overdone, the market soared to within only a quarter of a point of the alltime 521.05 high reached in 1956. Then in October, with the first signs of trouble, it came whistling down more than 100 points to a new 1957 low. At year's end it was backing and filling as investors tried to make up their minds what 1958 would bring.
Businessmen who had worried in May were calm in December. Steelmen sensibly pointed out that the nation's heaviest industry need not always operate at emergency throttle. "The auto industry no doubt could turn out 12 million cars a year if absolutely necessary," said a steel executive. "But when it produces only 6,000,000 cars, no one complains that it is operating at only 50% capacity." At times, businessmen even gave thanks for the breather. Frank Magee, president of Aluminum Co. of America, noting that aluminum has often been in short supply, said cheerfully: "For the first time in history, we can promise the potential user of aluminum a steady, dependable supply of metal."
A Pinch in Time. Many businessmen received the dip at year's end without alarm because they regarded it as a "recession as planned." As consumer prices had gone up month after month for the biggest rise (2.5%) in five years, the Federal Reserve Board, under tough-minded Chairman William McChesney Martin, worked with grim determination to keep the economy from growing too big, too fast. Martin stumped the nation preaching "inflation, not deflation, is the real danger." To check all phases of the buying jag—a rise in industrial expansion, piling up of business inventories and increases in consumer purchasing—the Fed squeezed tight on the nation's credit supply. As the demand for money kept rising, interest rates rose to the highest point since 1932. Even so, corporations floated some $12.7 billion worth of public securities. 16.5% more than ever before. As costs went up until they hit 4.5% for the biggest borrowers and 6% or more for smaller firms, many a corporation withdrew its issues and postponed plans for new plants.