New-York tribune., 1920-08-03
Sharp Break in
Stocks Follows
Buying of Rails
Decline Accentspted by
Catching Stop floss Or
ders; Steel Lowest Since
1917; Others Hard Hit

In its perverse movements yoster-
dav she stock market demonstrated
why professors Of economics do not
pay super taxes. Students of the law
of probability little expected day Of
crashing security prices on the first
business day after the substantial in
creases in freight and passenger rates
were granted to tho railroads by the
Interstate Commerce Commission.
The relation Of the rate decision to
stock values was too simple. The
amateur trader perceived it, and had
which railroad security to purchase.
The increases conceded with what the
railroad executives hoped to get, al
though they fell slightly short of what
they asked for Bankers and railroad
officials expressed the view that the
verdict of the interstate commission
would be fundamentally helpful to the
transportation situation.
From all parts of the country orders
came to buy railroad stocks at the
opening. In the first ten minutes Of
trading the enthusiasm of. spectators
over the rate decision was emphatical
ly registered in bouyant upswing of
prices, which carried many of the in
dustrials forward with the rails. Gains
of three points were not infrequent,
and for the first few minutes it
looked as though as an oasis Of bullish
water had been discovered in q bearsh
desert.
But the buying power spent itself
too quickly. The bulls on railroad
stocks gave a mighty pull at the open
ing of trading, but they all acted
simultaneously. BY 1910 o'clock the
professional traders perceived that the
energy of the buyers had been OK
floor traders began to sell heavily, and
forthwith the reaction set in. The in
dustrial stocks were the hardest hit in
the terrific reaction that followed, but
the rails, too, lost much of their early
gain, though many revealed a net in
crease for the day.
Steel common was UP a full point at
the opening, and it closed at the low
est level it has attained since 1917 be-
ing quoted at S5$s, off 2as points from
Saturdays close. Once the decline got
under way, it swept through the list
without abatement until the end of the
session. and such conspicuous stocks
as Bethlehem B, Republic, American
and American Woolen tumbled to the
lowest levels quoted this year. The
wave of selling not only reduced the
gains made by the rail stocks, but ac-
tually made some of them reveal a net
decline for the day. Atchison closed
off 1s; Pere Marquette off "a; Reading,
off 25s, and Union Pacific, off u
points.
The break resulted from professional
selling, which was aided by the catch
ing Of stop orders and by liquidation
from tape readers. Moreover, selling
came too, from disappointed longs who
thought the rate decision would cause
a rally which would give them a good
opportunity to sell out at higher levels
than those obtaining at the close of
last week.
Observers of the market seemed to
agree that the favorable decision from
Washington would have caused sub
stantial rise if the setting had not
been so distinctly bearsh. The mar
ket was clearly sold ex news yester-
day; that is, the bears were no longer
restrained by the consciousness that
a bullish development was impending.
Once the news was out the pursuers
of lower prices felt free to achieve
their purposes. Around the posts where
stocks were bought and sold it was
said that q leading speculator was
selling heavily all through the decline.
Those who insist on rationalizing
dwelt on the Polish situation yester-
day, and also on the tightncss of credit.
Despite the fact that the Clearing
House statement last Saturday for the
second time in a fortnight showed
deficit in reserves, call money opened
at per cent, and eased off to per
more Immediately alarming to folk of
conservative bent, especially in so far
as it revealed the power of the Soviet
government. The speculative commun-
ity is beginning. fully to realize the
magnitude of the war in which Europe
is now engrossed. Because of the un-
certainty Of the situation and dissatis-
faction with the methods of Polish
banking, many of the large Wall Street
banks yesterday declined to quote
Polish marks. The European exchanges
ling declined to the lowest level since
February.
In the commodity markets conditions
were different. On the Cotton Ex-
ctange the various months showed
gains varying from 35 to 102 points,
because the bearishness Of the govern
ment crop report had been over-dis
counted. 1t gave the condition of the
crop as Of July 25 as TAI, but market
operators expected rs. The report in
dicates crop of 12,519,0O0 bales, which
is 100000 bales more than predicted
month ago. The wheat and corn
markets also closed higher.
In the bond market the low-priced
rails rose sharply as result Of the
rate decision, and the tendency of the
Hhole market early in the day was up
ward. Reactions followed, but the rail
issues closed with net gains.
Money and Credit
Call money eased' Off yesterday to 7