The New York herald., 1921-08-06
FINANCIAL NEWS
AND COMMENT
Decline in Stocks Seen as Nat
ural Setback After Upward
Tendency Of a Month.

The stock market demonstrated yes
terday more clearly than on Wednesday
and Thursday that the public is un-
ready as yet 10 accumulate holdings for
the longer future. Otherwise there would
have been a stiffer resistance to the
profit taking sales and the selling for
short account put through by profess
sional hands. AS II was, partisans OF
the reactionary side OF quotations, see
ing that the markets OF the two preced-
ing sessions contained only diffident pur-
chases. became bolder and brought about
some really substantial recessions in
shares lately among the strongest.
Many rails and a broad field OF In
dustrfal stocks declined n to more than
points, the retreat gaining force as
time passed. The market was not very
active. however. and inasmuch as news
of the day having direct application to
stocks contained few features OF a de-
pressing nature the movement could be
considered as a natural setback from a
period of fairly general price advances
lasting more than a month
The market undoubtedly took cog
nizance of the Secretary OF the Treas
ury's coldly analytical discussion Of Gov
ernment income and expenditures, with
special emphasis upon his forecast of
necessity for increased taxation unless
contemplated outlay In the current fiscal
year We're not reduced more than $780,
100000. The picture he presented In his
estimates before a House committee on
Thursday was excellent material for the
short seller, as the stock market has
come TO expect a downward revision Of
certain taxes and counts upon II as a
force in lifting prices in the next broad
advance.
But factor of possibly greater IN
fiuence behind bear operations and one
to hasten realizing sales was a renewal
rate of per cent. for call loans and a
slightly firner tone In the time money
market.
Probably many who bought shares
last week for speculation counted too
heavily upon the fall of caIi money from
AZ to 3h per cent. for one day as an
indication Of a lengthy period OF excep-
tionally low rates. It is not to be for
gotten in seeking to mea,ure the money
market that the discoun. charge for
mercantile bills and not the demand
loan quotation establishes the true cost
Of money, and this has not fluctuated
far from per cent.
The Reserve Bank statement for tho
week showed plainly that money flowed
away from New YORK. the banks credit
in the intrabank settlement fund reced-
ing no less than s4s,oo0,oOo. and while
this movement. coupled with the decline
OF more than s2s.000.ooo in member
bank deposits with the central institu-
ton. suggested that deposits of interior
banks had been taken away because Of
the fall OF the call loan rate. an ex-
planation also lay In tho normal needs
Of crop raising regions. The wheat crop
this year than in years OF normal tenn
peratures. resulting In drafts upon the
Eastern banks on a fairly largo scale
before instead OF after the middle OF
August.
If the precedent of other years applies
this year there should bo for time a
growth OF Reserve Banl: loans in the
East and an Increase Of circulating
notes. But the crops are being turned
into cash more rapidly this year than
last, and this, together with liquidation
OF merchandise stocks, ought to prevent
more than temporary harden
ing of money rates.
A rise of more than half point in
Liberty 31as under quite active trading
during the morning seemed to denote
speculative purchases fastened by the
taxation outlook. This issue is exempt
from income taxes. Later however. the
AIS softened with all the other Liberty
issues, ending with slight net decline.
The bond market as a whole held UP
firmly, despite the tendency of money.