Evening star., 1923-11-04
MARKET REVERSAL
! HARD TO EXPLAIN
Fundamental Conditions Had
Not Changed When Steel
"Extra" Was Voted.
GARY'S VIEWS HELPED
Confidence in Business Outlook Ap.
pears Improved-Bonds
Turn Stronger.
GARY'S VIEWS HELPED
BY GEORGE T.. HUGHES.


Special Dispatch to The Star.
NEW YORK, November 3.--Without
doubt the most spectacular event of
the week in the security markets was
the declaration of an extra dividend
of 4 of ! per cent on the common
stock of the United States Steel Cor
poration, together with the publica-
tion of an earnings statement far
more favorable than Wall street had
anticipated.
More important than the action IT.
self was the Inference from the ac-
ton that the steel directors had con-
tidence in the business outlook. Judge
fary's statement on this point was
The most reassuring heard in weeks.
The result was violent advance In
stock OF nearly all grades. but es-
pecially those in which the large
short" interest existed. The retreat
of this short interest was helped
along by the optimistic statement of
4 professional speculator whose career
has been the subject of great deal
of attention. and who completely re-
Tersed the position he took SIX months
ago.
Rise Not Due to Changes.
This turnabout in speculative SEN
-timent came without any change in
the fundamentals OF the business sit
tIation. There remained much as
they had been for the past month
or so. Money continued easy and
credit abundant. Railroad car load
fngS We're at almost their record
nigh. Chain stores and mail order
houses still were reporting very
large sales. The outlook for the au-
ind, rn,,l. n ,nt ba oil,
ly discerned until the seasonal lull
now prevailing is over and some line
could be secured on the spring de-
lnand. The oil trade was still strug-
Cling with excessive production and
The rubber and tire manufacturers
with intense competition.
Cotton quotations scared to new
highs. while the textile manufacture
crS were in grave doubt as to just
how much of the additional cost Of
the raw material they could pass
on to the ultimate consumer. Per-
haps the most favorable feature was
-he better situation of the farmer
except possibly the wheat producer,
and even his position was certainly
no worse.
Move Called Psychological.
It can be fairly said then that the
Geological. Evidently the profession
al traders in securities, whose gloomy
Dutgivings had saturated the Wall
street atmosphere for the past three
months, were no longer able to com
'nand so attentive an audience. The
change is important in two ways.
For one thing. the business man is
relieved, for the moment at least. OF
the doubt as to the business future
which the spectacle of steadily fall
ing prices always raises in his mind
IN the second place, it clears the way
for the stock market to resume Its
major function of forecasting trade
development. Whether the improve
Inent In prices will go further or
will be even maintained at its pres
ent level no one can say, but the
verdict Of the market will be looked
20 with more respect than was ac-
.orded the fluctuations of the pre-
"eding weeks. dominated as they
we're by purely professional specu-
lators.
Vital Bearing ON Stocks.
Coming back to the action Of the
directors of the Steel Corporation as
TO the dividend on the common stock,
the investment status of the stocks
of all the stronger industrials and
utilities. When the American Tele-
phone and Telegraph Company placed
jts stock on 9 per cent basis and
started it's campaign for wider dis
were expressed as to the wisdom OF
he move. The result, however. has
been to give this great utility the
largest number Of stockholders OF
any American corporation, has STAB
jliZed the market for it's securities
and contributed largely toward bet
ter understanding with the public
The steel directors probably have no
Intention of going SO far. but moth
ing could be more encouraging 10
The small shareholder than putting
steel common permanently on =
per cent basis. toward which the ex-
ira seems to point.
Ade0uate Returns Necessury.
In these days of high income sur
taxes the man of large wealth can
no longer be relied upon to hold COM
,nonsstock, half the dividend on which
he must pay back to the government
Some one must take his place, and II
,his is to be the small investor he
must have a more adequate return
than 1t has been the practice OF the
steel Corporation to give. There are
a few other large corporations, IN
Guiding. probably at least one rail:
road-the Atchison-which could
ralse their dividend rates without
transgressing the limits of conser-
vatism II financing is to be done by
issue of stocks instead of constantly
increasing bonded Indebtedness the
railroads Will nave 10 COIilt W llIlS.
Always excepting the foreign ex-
changes, the markets continue tc
ignore the outlook abroad. Exchange
rates f1uctuate rapidly, but foreign
bonds remain quiet and steady. More
interest Is taken in domestic. securi.
ties than in the foreign.
Bonds Appear Stronger.
In the bond market there has been Z
remark able display of underlying
strength in all high-grade obliga,
tions. Investment bankers are much
encouraged at the outlook. There l:
no sign of any rise in money rates
n fact, the tendency seems to be the
other way. That being the case. there
has been a turning Of attention tt
long-term, low-coupon rate bonds
which has been reflected In the quo
tation for that class Of security. Mos
seasoned issues of this grade are still
selling under the high points of tn,
year, so there is room for improve
ment. regardless Of the comparativel!
small yield the best Of these bonds
give at present prices.
Copyright. 1928.