The New York herald., 1921-06-16
FINANCIAL NEWS
AND COMMENT
Reserve Bank Cuts Redisc0unt
Rate to 6P. C.-MeXican
Petroleum Off 13.

Inc most important 0sVeiOp'nent al
fecting the financial markets yesterday
was the reduction OF the Reserve Banks
rediscount rate on commercial paper
from 615 to per cent That action put
all rediscounts in New York on the
same level, and news that the commercial
rate at the Dallas Reserve Bank also
bad gone down to per cent. suggested
that other institutions would follow suit.
The rate in New York is now where 1t
stood on June /, 1920. prior to a rise
from s per cent. TO per cent. in an
effort by the banking authorities to check
the extravagant expansion Of loans
which was then under way. The sug-
gestion from the rediscount movement Is
obvious The Federal Reserve position
has improved steadily. the ratio of cash
to deposit and note liabilities is now
moro than IL per cent. higher than It
was on January l. and liquidation OF
loans and retirement Of currency has
proceeded so rapidly In the last three
months that easier money conditions are
pSliSNeu pN CoTipetSHl paHhSiS W os
close at hand.
The Reserve Banks action was not
taken until after the close of the stock
market. and. therefore, had no infiu-
ence on sentiment in speculation. Stocks
were swayed by the same erratic forces
which had been in evidence for many
days. an extraordinary demonstration
of opposing interests being staged In
pressed z points in the very first trans
action. fiuctuated with great rapidity
throughout most of the session, and
under heavy pressure near the close was
driven down for a net decline of Is
points. The allied Pan-American Petro-
leum and Transport shares fell and S
points respectively, and weakness In
that quarter quite naturally affected
certain other oil stocks Sugar steel and
tobacco issues fell l point to more than
points.
The stock market was not. however,
as weak generally as the movements Of
a dozen industrial issues seemed to indi-
cate. Rail shares were steady, except
during periods OF especial pressure else
where. and an advance OF / 4 points In
Northern Pacific was a correct forecast
OF action on the dividend late In the
afternoon. rhe Street knew that the
dividend for the current quarter had not
been earned, but the decision of the
directors to continue the usual return
of Is4 per cent. to stockholders out Of
accumulated surplus was considered
constructive. both as an earnest of the
desire OF the management TO keep div
idend record unbroken and also as
possible forecast OF enlarged earnings In
the future.
Although there probably was some
selling OF Mexican Petroleum from ac-
counts with impaired margins. the lafger
aspects of the situation disclosed the
success of SPECTATORS who were con-
vinccd that the outlook for continued
production in existing Mexican fields
was unfavorsble. For several months a
battle has been waged In that stock be-
tween traders who believed that Mexican
oil reserves were dwindling and owners
of shares who retained confidence that
the management was entirely correct in
maintaining that large quantities of
petroleum would come out of Mexico for
the next thirty years. What precipitated
the decline yesterday was reference to
the oil situation in Washington. The
opinions OF public and private investlga-
tors OF the Mexican fields have been
aired frequently. thereby losing some of
their stock arbet effect. but the fact
that the Department OF the Interior had
Informed the Secretary OF State that its
information was not sufficient for re-
port on question so critical as that of
the prospective output of oil in Mexico
was OF much use to the bears on the
stock.
Call money vas s y per cent through
out the day. The foreign exchanges
continued 70 advance. sterling rising
nearly 2 cents to the pound. The reac-
tionary tendency OF grain prices was
continued. wheat futures falling to
cents as the premium on cash wheat re-
ceded. In cotton, too. the movement of
quotations was downward.