Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-02-27
COMMODITY PRICES
WORK DOWNWARD
Stocks Drop and Investment
Activity Slows Up During
Week-The Outlook.
BY STUART p. WEST.
cha, Dispatch to The star.


NEW YORK, February 27.-During
the past week the main incidents in
the financial district have been the
continued downward tendency in COM
modify prices, further sharp recess
sions in the greater part of the stock
list, slowing up of the investment
activity. which was such a feature
week ago, and withal q somewhat
higher drift in money rates.
These movements have been rather
contradictory. Ordinarily stock mar
ket liquidation and lower valuations
on Industrial products ought to call
for easier money and q rising inclina-
ton in investments. The fact that
time loans are quoted fractionally
higher, and that call loans are not so
readily available as they were, can
only be explained on one ground. This
is that interior banks have not been
favorably impressed with the figures
on Wall Street credits as they are now
being published week by week. These
statistics have led to the suspicion
that the Stock Exchange position has
been inflated and have, in conse-
quence, made out-of-town institutions
less ready to lend out their balances
on stock collateral.
Borrowings Not Excessive.
This feeling of uncertainty does not
seem be justified. Taking into account
the increase of 20 per cent in new
stock listings and of 20 per cent in
new bond listings during the last six
years, the total Wall Street borrow
ings, while they appear high, are
really not excessive. They simply cor
respond to the natural increase In
credit demands growing out OF the
much larger volume of securities
which has to be taken care of.
The main difficulty with the stock
market Is not a money difficulty. Lit
tie attention would have been paid t.
the slight hardening of money rates
had there not been over speculation
and undue upbidding of prices in vari-
Gus directions. But the higher tend
ency in the money market has been
emphasized because Of the reckless
operations for the rise which went ON
during the Autumn and the early
Winter, especially in the industrial
section and in some Of the public utii-
tiles.
Tax Bill Inspires Selling.
One explanation commonly given for
the recent Wall Street decline is That
the passing of the income tax bill. IN
yolving a substantial cut in surtaXes,
has made big holders of stocks feel
more willing to sell. Very likely this
has had a good deal to do with the
course of the current market.
On the other hand. there Is no evI-
dence as yet that diminishing the bur
den on the wealthy is causing an eX-
change of tax exempt securities Tor
securities which have to bear the tax.
Within the week the taX-free Liberty
31hs have sold at the highest of the
year.
Commodity Consumption High.
All business reports continue TO the
effect that the volume of consumption
S unusually large. Still consumers
are not in the state OF mind they were
three wears ago when there was
scare about future supplies. They feel
confident that the market will not run
away. and are therefore buying for
the most party for immediate needs
only. This is d situation which does
not make for higher prices. Dun's
Review reports for the last week that
of the price changes noted for com
modities. Al out of 81 have been de-
clineS.
There is an intimate connection be
tween the commodity price situation
and the recent trend of stocks. AT
the outset Oh IllS Ntd4 piCNANIAOAiC ~
carding the business future were more
optimistic than have been justified by
subsequent events. This has not been
due to any falling off IN the trade vol
ume. All the data. such as the ran
way car loadings, bank clearinSs, and
gross earnings in general, have been
favorable. But the trouble is that
this great business is being taken III
most lines at a low profit margin.
A striking example of low prices is
to be noted in the cotton trade. The
December option. representing the
present view of the new cotton sea
son, is selling around 1714 cents Z,
pound. This is below the average
cost of production. Unless the later
cotton planting is restricted, or unless
some accident overtakes the new crop,
the ma jority of cotton growers face
the prospect of doing business at -
loss.
French francs have made a mod
crate recovery during the week. II
is probably due to nothing more than
the covering in of n part of the eX-
tensive international short interest
To some extent it may reflect the
hope that the new fiscal proposals
will go through in a form which will
be adequate to balance the budget
But there have been so many disap-
pointments along this line that In
banking circles there is no great con
f1dence in the outcome.
Copyright. 1926)