New-York tribune., 1920-03-09
Stocks Slump
On False Tip;
Then Rebound
,,.dustrial List Collapses
a. Result of Report That
Court Held Paper Divi-
dends Taxable as Income
Street in Selling Frenzy
p..c,;on on Correction
Marked by Vigor That
Takes Prices to High Level

\. erroneous report that the Su-
-. Court Of the United States had
J. ~ that dividends paid in stock were
~.h,s under the income tax law sent
.,s .umbling in Wall Street yester-
s.v The upset was the most severe
~. market has known since the crash
= xovember, 1919, as the belief that
a..ision would hold such dividends
4 h. tax-free had been general and
.r,ators were in consequence
loaded up
p.fore the disastrous unloading
...ss was finished the tickcrs cor
s..+.s the error, spreading the news
40. the decision really exempted stock
Sv;iends from the income tax. The
.,..,ion. which had set in as brokers
.,..;ved advices of the error by pri-
cate wires, became violent, the net ad-
x.,..s in some active issues exceeding
70 points.
Market Collapses Under Pressure
Al 1900 p. m. the Wall Street news
a.ker of Dow, Jones & Co flashed out
n. erroneous report. Spectators had
hssn expecting a contrary ruling for
months and many thousands of shares
had been purchased in the hope Of
big advance in prices. The effect of
the ticker report was immediate. There
was great rush by those who had
anticipated favorable outcome to
get from under" while professional
operators, who were working for
lower prices, lost no time in taking
advantage of the apparent opportunity.
They sold stocks short in large
Volume. The market, which had been
fairly strong, was unable to withstand
the tremendous selling pressure.
Prices of the stocks particularly af-
;ected by the decision. such as Crucible
Steel, tumbled whole points between
sales But the rout was not limited,
r,he whole industrial list gave way.
Losses of from three to seven points
were established within a few minutes
Then, just when it seemed that the
market was headed for the bottom,
prices became firm. The sudden halt
was hard to account for at the time,
bu. it developed that some brokerage
houses had received private advices
that the first report was an error and
had started to retrieve their losses. 1t
was not until 1854 p. m, however, that
the tickers carried correction, stating
that the Supreme Court had sustained
the lower courts in the contention that
stock dividends were not taxable.
Error Costly to Many
|. was one OF the most costly mis-
takes in Wall Street history. Thousands
who had sold stocks on the false report
we're compelled to buy them back at
much higher figures. One trader stated
that ne had lost $4,000 as a result of
the error, and he was only one of hun
dreds who could recount similar ex-
periences.
Immediately after the correction was
printed there was a scramble to buy
stocks, and prices scared even more
rapidly than they have slumped. Cruel
Die Steel, which had sold down to 19l
Jumped to 223 and closed at 227, with q
net gain OF 30's points. The trading
n this stock was so congested that or
ders to sell "at the market" were exc
euled at as much as s points above the
pAce printed on the ticker at the time
ne ~. orders were given. Similar con-
ei'lonS prevailed elsewhere in the in
oaslrlal iss General Motors. the
Moest moving stock on the board
1 climbed from a low of 26O to 3O2 and
eosed a; with net gain of 42A points.
Dadwln ,s1 Locomotive, with range of
As, gained Tss. American Woolen
was was up lOA; Chandler Motor 8$4
Snlted States Rubber 3A; Republic
Sv Meel os and United States Steel
49, the st-named getting above par
W' tne hrst time in several weeks. The
the close, ~
Erroneous Report Explained
Dow, Jones & Co. gave out the fol
owing statement in the afternoons:
Fiash bulletins from Washington,
sni snien are sent from the Capitol, in
xalcn the Supreme Court sits. con
Sthing the stock dividend tax decision
w., ssfe incorrect and directly contrary to
Court. ~ '"0 00pi ei'e
Not only were the flashes to finan-
s,a' VIC. agencies wrong, but those sent
W.. w. ny news services were also incor-
H.. Because Of the apparent corrobora-
,.a uum tnese dispatches gave the other
,sgor1s, the incorrectness of the news
rs rss olfhcuit to check 1t was only
. .nsa the statement that the lower
.vs'e s,si , was upheld, which appears sew
psa pa1 hundred lines down in Justice
.h,.aeys decision, came over the wire
sso .ras !. was realized the first fash was
,,.,nls and corrections were immedi-
NY sent out by all services"
.ne following statement was issued
'a.er by The Associated Press:
Inc service of The Associated Press
sss sss accurate in every particular. We
W. .aa IL necessary to make this state
C ea. because the Dow-Jones Ticker
snvmpahy after correcting it's own er
vs'.t s"sous statement declared: Not only
Nete the .has es,, To financial arencie $