BOSTON — Imagine that: Jiang Zemin, the president of supposedly communist China rang the bell to open trading Friday on the New York Stock Exchange - the great symbol of capitalism. He even used the thumbs-up salute.
For investors, the world has certainly changed.
Look at further extraordinary events last week:
* The Dow Jones Industrial Average dropped 554.26 points Monday, a record, as Wall Street seemed to take its cue from Hong Kong's plunging market. The Dow's percentage drop was 7.18 percent, big but well off a record.
Tuesday, bargain hunters drove the Dow up a record number of points, 337.17, or 4.7 percent.
* Trading volume during the week was a record. Tuesday saw 1 billion shares trade hands for the first time ever on both the New York Stock Exchange and the Nasdaq Stock Market.
* The globalization of financial markets was again demonstrated, with share prices rising and falling around the world with almost choreographed synchronization. By midweek, strength in the financially mighty United States was setting the pace. Stocks rose Friday in most major markets.
* The US committed roughly $3 billion to a $15 billion emergency aid package for Indonesia organized by the International Monetary Fund in Washington. Though Indonesia is the world's fourth most populous nation, such American intervention would have been regarded as unlikely just a few years ago. Unlike Mexico, a neighbor, Indonesia is about as far away from America as possible on this globe.
Now investors are looking ahead to what could be another pivotal week. Will the market continue to stabilize? Or does the Monday drop portend a shift in market mood?
Companies that fail to meet earnings forecasts have seen their stock prices punished of late, hinting at broad concerns. But events last week did ease worries that the Federal Reserve will raise interest rates - which are seen as another key to market performance.
Bearish analysts note that downward "corrections" rarely occur in simple one-day drops, like last Monday's. And it has been a long time since this bull market has been tested on the down side.
Yet last week ended on a cheerful note.
Prices advanced on the London Stock Exchange Friday. Tokyo and Hong Kong shook off early losses and finished higher. The Hong Kong dollar, under assault in foreign-exchange markets, held fast. Brazil's Central Bank spent between $7 billion and $10 billion during the week to defend - so far successfully - the nation's currency, the real.
In the US, the Dow climbed 60.41 points on Friday to 7442.08 - a boost to Wall Street's mood. For the week, the Blue Chip index was down 3.5 percent.
Stuart Freeman, chief equity strategist at A.G. Edwards, a major retail brokerage based in St. Louis, predicts the Dow will reach the upper 8000s in the first half of next year, a new record.
"We are pretty darn bullish," he says.
Stocks are cheaper now, he says. And Bond yields have fallen, "making stocks look attractive." Further, corporate earnings are expected to rise 8 percent in 1998.
Unlike the case in other market downturns of the past decade, the economy is not overheated, Mr. Freeman adds. "We have a modest-growth situation."
He regards the troubles in Southeast Asia primarily as an excuse for last week's market correction. "It took something a little bit negative to give investors a reason to take a profit," he adds.
Joseph Grano Jr., president of another major brokerage house, PaineWebber in New York, regards last week's market upset as "a much calmer event" than the October 1987 crash.
His firm's 6,000 brokers had to make what he terms "maintenance calls" - phone calls to ask investors to cover a portion of money borrowed to buy stocks - on only $20 million of loans Monday. That is up from an average $3 million a day on outstanding loans of $3 billion.
"That is not a big jump considering the speed and depth of the fall," he says.
Mr. Grano expects stock prices to be supported by the desire of baby boomers to save and invest for retirement. "They are probably the reason the market has reached the height it reached," he says.
By age 43, he notes, the average householder has bought his or her final home. At age 46, that person is likely to be the deepest in debt in his or her lifetime, with a mortgage and one child in college. At 52, people make the most money they probably ever will. At 54 to 65, they are saving and investing with a vengeance.
"We have never had so many Americans at one time making, saving, and investing so much," Grano says.
Most won't consider the return from passbook savings accounts in banks or Treasury securities adequate, especially considering the return in recent years from stocks, he says.
"This bodes well for the stock market on a long-term basis," Grano says. He forecasts the Dow reaching 10000 by the end of the year 2000.
But, he notes, stock markets do not go up in a steady fashion. So, as investors get older, their investment mix should become "a little more cautious."
Grano is proud of how the securities industry handled last week's event. The stock exchanges ably managed trading volume twice that in the 1987 crash.
His firm totally reconciled its traffic from the record trading Tuesday by 6 a.m. Wednesday, only three hours later than usual, he says. And while some firms saw telephone jam-ups, he heard no complaints from PaineWebber customers unable to reach their brokers.
Note to readers: Last week, we promised articles on getting started with mutual funds and budgets for this issue. But tremors in the stock market shook those plans out of place. Instead, we've focused this week on market volatility and our investments. Next week, getting started with mutual funds and budgeting software.