Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-07-16
STOCKS AND BONDS
CONTINUE HIGHER
Reinvestment Funds Factor,
Money and Credit Still
Are Easy.

Special Dispatch to Tho Star.
NEW YORK, July 1G.-The week
just closed has been marked by a re-
sumption of the upward movement in
stocks. a better demand for bonds,
and evidences of increasing ease in
money and credit. Indications point
to a continuance of these conditions,
for the near future at least.
The rise in stocks was led by the
semiinvestment issues. but specula-
tive shares had part in the improve
ment. 1t Is hard to say which was
the most influential factor in the
market, The only trade development
OF significance was the increase, small
but unexpected, in the untitled orders
of the United States Steel Corpora
ton. The figures were made public
after the close on Saturday, but were
not reflected in the market until Mon
day, and from then on to the close of
the week steel stocks were strong and
at times buoyant. Wall Street had
looked forward to another decrease in
tonnage, and when the event proved
otherwise it was taken as an indica-
ton that the turn in the steel industry
had come.
Reinvestment Funds a Factor.
Then the enormous mid-year interest
and dividend disbursements for the
first time since July 1 made them
selves felt in the market this week.
There could be no misunderstanding
of the meaning Of the demand for the
high grade seasoned dividend.paying
rails and utilities; they were being
taken out of the market for perma.
nent holding. This reinvestment
operation this year concerned itself
principally with stocks and to n very
small extent with bonds. That, too.
was a mark Of confidence in the sta
bility of business.
OF greater weight with the specula-
tive element was the movement of the
averages" The average price Of
the 90 railroad and 20 industrial stocks
that go to make up the Dow Jones Sc
lections set a new high mark this week
for all time. All the reaction Of June
was Cancelled and new advance indi-
Gated in both groups. IT is a theory
held in great respect by traders that
when both these averages go through
their old tops it signifies q continu-
ance of the rise. Whether there is
anything in the theory or not, it had
an effect on the market.
Brokers Loans Declining.
More fundamental is the credit sit.
uation. The statement of borrowings
by brokers. given out by the Federal
Reserve this week, showed that the
total was back to where it was at the
first of June. The sum is still large,
over $4,000, 100000, and higher than it
was at any time during the first five
months of the year, but the trend is
the important thing. The decrease is
supposed to be due to the winding up
of bond syndicates, which have had
difficulty in distributing new offerings.
There is no way of checking this sup
position because the banks do not sep
arate in their reports loans secured
but 1t probably is correct.
Along with this decreased demand
went increased resources. The Fed
eral Reserves weekly statement show
ed gold reserves up above the three
billion mark and not far from the high
of May II, which was the highest
since 1924. 1t showed also smaller
commercial requirements, either that
or a greater independence of the men,
Der banks. in the drop in discounted
bills.
The Gold Situation.
Back of it all, of course, are our
excessive gold holdings. When
something happens to bring about a
redistribution of this excess the entire
outlook will be changed. Other coun-
tries need the gold and we do not,
but there is no sign now of any turn
in the tide. The Department of
Commerce reports that for the six
months ending June 80 gold imports
were $161, $4,000, against exports of
$29,872,00O. The excess of imports
Is not very large, yet it results in
an addition to an already large total.
The same Department of Commerce
report shows merchandise imports
and exports during June were almost
exactly balanced, while for the six
months the exports were much the
greater. Theoretically. under present
world conditions, the United States
must buy abroad more than she sells;
otherwise the war debts can never
be paid. nor can there be any re-
payments of private foreign loans.
But as far as the statistics go, that
day is still in the distant future.
Business Outlook Mixed.
So much for the relation OF the
stock market to credit. What about
business? The answer depends upon
what line of trade the question Is
interested in. The stock market does
forecast business and sometimes it
does not as a whole, but not now. If
there is any meaning in the strength
Of stocks aside from the inf1ationary
effect of Superabundant money, it is
that the market is prophesying pros.
perity in some quarters and not in
others.
There is no doubt about the rail-
roads. While June earnings state
ments to be released next week will
not make as good a showing as those
Of the same month a year ago, that
expectation has not been reflected in
railroad stocks" The market pre-.
diction Is for reasonable railroad
prosperity for an indefinite time to
come.
1t is the same with the public utili-
ties. Their future is assured, as far
as the stock market indications go.
When we come to the industrials, the
Interpretation is more difficult, but
1t seems to point to greater concen-
tration of business in the largest and
strongest corporations. Low margins
of profit and intensified competition
have made it almost impossible for
the smaller units to operate success
fully. Whether this is a good thing
or not depends on the point Of view
AT any rate it is the story the stock
market tells.
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