Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-07-09
STOCKS' RECOVERY
IS NOT SUSTAINED
Bond Market Badly MuddIed
and Money Is Easy in
Weeks Trading.
1r(X.sLEs 2. SeEAGE.

81 K.SLES =. S?EAEE.
Spec. D.soa.on to The Star.
NEW YORK, July 9.-The weeks
developments In the financial domain
included stock market which has
had an irregular recovery from the
depression OF June. but one not fully
sustained to the end a bond market
that was dominated by the technical
position Of new issues. and money
market that had all the outward ap-
pearance Of great ease. notwithstand-
ing the reCord-breaking borrowings on
collateral put up by brokers.
Although the stock market did
move into higher ground on the aver
age. the action was not convincing.
The snap and animation that marked
speculative operations early in the
year were lacking. The market APP
reared to have reached the stage
where. the credit situation having
been fully discounted and Autumn
business prospects being yet uncer-
tain. stocks were left to drift for
| themselves.
In sons groups trend was dis
coverable and In others it was lacking.
| The motor shares registered concern
about the increasing competition and
the possibilities Of extensive price
| cutting The oils showed that they
| had been fairly we'll sold out. but until
| there is let-up in production there
| Is little chance Of price improvements.
! Stee,s were dull and inclined to so
lower. as might have been expected
| from the prevailing low rate OF opera
tons in the mills.
1t was in the railroad group tina {
the greatest irregularity prevailed
Most OF the time the low-priCed issues
held the center OF the stage. Some
Of these were bid up violently, ap-
parently on merger prospects and
nothing else. While this was going
on. standard dividend-paying issues
that ought to respond to investment
demand were dun and neglected.
Little attention was paid to the
falling OF in net income in the May
earnings statements. apd confidence
was expressed that in the Fall re
suits would compare favorabIy with
those Of the same period in 1926. The
figures show that the net operating
income of class 1 railroads in May
this year was $85 ,663999, compa red
with sss.129,79s in May. 1926.
Goodyear So the Bond Feature.
In the bond market the chief Incl
dent was the action OF the Goodyear
s per cent issue after the support of
the offering syndicate had been with
drawn. The series Of price fiuctua-
| tons that followed have had few pre-
cedents in the history of the ex-
change.
At one time during the week there
were three separate ways in which
| these bonds were being traded. One
price was quoted for bonds sold in the
| regular way--that is, for delivery in
the afternoon OF the day following
| the making Of the contract. Another
| figure, and much lower one, was
quoted for bonds sold delayed deliV'
| erv"-that is, any time within seven
DAYS. Finally, there were sales mace
/ for cash. and these were at the high
est price Of all. or course, 1t was
short selling that brought about this
situation. an unusual incident in the
bond market but very ordinary IN
stocks.
The matter attracted 50 much at
| tention that the suggestion was ao
! vanced for the organization or a ne"
! exchange, to deal in bonds, separate
| from the Stock Exchange. Repre-
sentatives of bond houses were also
reported as discussing ways or stop
| ping the practice OF short setilnS'
or course, there Is no chance for
ANYTHING so radical as the setting
up Of a new exchange coming to pass
nor Is 1t likely that attempts to cut
| out short selling will succeed. IL
there is an economic defense for short
selling in stocks, it will have TO apply
to bonds also.
All the trouble arose because In
the last month or two new bond offer
DCsfO
than the market could absorb them.
Withdrawal OF syndicate support has
given the market a more natural
tone, but how far it has served to
rectifv the oversupply depends upon
| whether the bonds are finding their
way outside the Street into the strong
boxes OF investors. There is no EVIL
dence on this point yet.
Loans at New High Level.
The Stock Exchange report of the
borrowings of it's members as OF the
close Of business on June 80 revealed
total OF $3.568. 966.843. the highest
on record. The weekly report OF the
Federal Reserve Board, including
loans made by member banks in New
York City, also showed 4 slight in
crease Of the seven-day period end
VIZ Oh wednesday. 1fidSIIluCU DIS
these figures we're without effect on
the market for call loans they were
ignored by spectators.
AS for the Federal Reserve Bank s
statement. that shows a drop in hold
ings of gold and an increase in dis
counted bills. The ratio OF reserve
was down almost a point. but still
more than 3 points above what it was
a year ago at this time.
From the long range standpoint
nothing Is OF greater significance than
the conference OF the foreign banks
with our own Federal Reserve and
Treasury officials This Is so because
whatever form their discussion takes
1t must cover the subject OF the for
eign exchanges and their relation to a
possible redistribution OF the worlds
gold supply. The pressing problem is
that OF establishing a gold standard
in France. In preparation for stabiiiZ
ing the franc, the Bank Of France has
accumulated large gold holdings in
foreign financial centers. which II il
should decide to transfer to Paris
might easily disturb the international
equilibrium.
The London money market is the
most concerned. but we have an inter.
est at stake also. Then there is the
eVer-preSent problem of the transfer
OF German reparations. Germany will
undoubtedly reappear as a borrower in
the American market. but the proceeds
OF these loans will only serve to post
pone the day when a favorable trade
balance must be established. Unless
GERMANY can set IN an pyCeSS Of