Evening star., 1927-04-24
SECURITIES CLIMB
IN WEEKS TRADING
Story Told by Averages, but
Some Weak Spots Are
Seen in Markets.
BY GEORGE T. HUGHES.

special dispatch W AAfs otSfs
New York. April 23-The Sc
curity markets closed the week higher.
This is true of bonds and stocks alike,
or at least 1t is the story the aver
ages" tell. There have been plenty
of weak spots, but they have not been
prominent. The movement that has
attracted attention has been that on
the side of advance
There is one sharp distinction, how
ever, between the stock and the bond
market. Opinions as to the immediate
future of the former are widely di-
vided, both among bankers and among
professional spectators, but there is
only one view aggfessively expressed
about the latter. and that is that
bonds viii continue TO improve
OF course, the reason for possible
divergence between the two markets
is that bonds viii fiuctuate almost
solely in response TO money condi-
tions, while stocks have to take into
account not only the business out.
look but the fact that the prolonged
rise has necessarily impaired the tech
nical position. There have been no
speculative eXtrayagances in bonds
a. there have been in stocks.
New Financing Not Excessive.
New financing is not excessively
large, either. Offerings this week to-
tailed S107 1853, 800 against S1S2 140 600
last week and S136 $50 600 in the same
week year ago. For the most part
the new issues have been well sold.
1t must not be overlooked that the
bond market, although it made a new
high this week since 1913 has had
sufficient periods of reaction TO keep ii
from becoming "overbought," as the
phrase is. In this particular also il
differs from stocks.
The chief stimulus to bonds this
week came in the announcement of
the cut in the discount rate of the
Bank of England. Immediately the
suggestion was advanced that sim
liar action would follow by the Fed
eral Reserve Bank OF New York, and
bonds, notably United States Govern.
Ynent securities, were in demand on
that possibility. When the reduction
here did not materialize it was said
by those who had predicted n cut
that it had only been postponed and
that eventually the margin between
the London and New York rate would
be put back to the per cent existing
before the Bank of England had |
acted.
In favor OF this opinion was the |
expectation that lower interest rates /
in London would result in the with /
drawal Of American balances and 50 /
affect adversely sterling exchange. /
Then the "gentlemen's agreement /
which is commonly believed to exist /
would require New York to reduce /
its official discount rate also and so |
heIp support sterling.
Might Encourage Speculation.
The other side of the argument was |
voiced by q New York banker who /
pointed out that reduction in the rate I
here might easily encourage specula. |
tion in stocks, which is evidently in
need Of no encouragement. Such |
prospect would be viewed with alarm
in conservative quarters already con-
cerned over the speculative situation.
Nor is there any need of any lower
official rate as an aid to business.
Commercial paper and time loans
show no signs of hardening, while
call money on the Stock Exchange
has ruled at 4 per cent and has been
obtainable In the outside market at
concessions. Moreover the Federal
Reserve weekly statement shows total
gold holdings at the highest of the
year to date.
The important event in the foreign
field has been the banking crisis in
Japan. Just how serious this situa-
tion may become is not entirely plain,
/ but there is no doubt it is serious
enough The only effect on our
markets has been to depress Japa.
nese dollar bonds. international dis
tarbances of this character sometimes
spread far beyond the borders within
which they originate. but no expecta-
tion OF this kind has been reflected in
the stock market or anywhere else
except in japanese bonds themselves.
Not Logical Development.
Even this part of the market has
not developed logically. There is
nothing to indicate Japanese govern.
nlent or Japanese municipal obliga-
tions are any less secure than they
were when they were selling at the
highs of the year, but these securities
have been relatively weaker than
japanese utility or industrial descrip-
fions which would be affected by
prolonged period of financial and COM
mercial difficulties.
Coming down to the market in more
detail, the striking thing has been that
oil bonds have been so strong, moth.
withstanding the weakness in oil
rtocks and the pessimistic forecasts
Of leaders in the industry. This IA
vorabIe attitude of the investing public
has enabled new oil financing to be
readily accomplished and more Of 1t is
to come.
The most important new offering
along this line this week was the
$50 600 600 Of per cent debentures Of
Shell Union offered on a basis TO yield
the buyer 5.04 per cent This one
issue accounted for nearly half the