Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-13
RECOVERY IN STOCK
MARKET IS RAPID
List Regains About Half Of
Losses Sustained in
Recent Break.
BIZ CHARLES F. sPEARE.

By CHARLES F. SPEARE.
| Special Dispatch to the Star.
NEW YORK, october 12.--In one
| week the stock market has recovered
/ about half Of the average decline in
industrials that had occurred in the
previous three weeks. The same Is true
| of United States Steel, which carried
| the list down with it and has led the
market in its rally, also of General
Electric, Baltimore 81 Ohio and others.
Then there are some stocks, like the
tobaccos, that have gone far ahead OF
! their former prices as trade situations
have improved and so have balanced
| the effects of mild disturbances else
where.
Not only has it been a week of rising
! stock prices, but one OF falling rates
| for money. Brokers loans have con-
| tracted after two months expansion.
unified tonnage figures Of the iron
| and steel companies have increased,
though they were expected to decrease.
| Last, but not least, an Improvement
IN the bond market has developed
which seems to be of more sub
stantial character than any similar
manifestation this year.
Two Political Factors.
Two other factors in the realm OF
| national and international politics have
| played a part in Strengthening the con-
| fidence OF security holders. One was
the announcement that Mr.. Mellon
| would continue to hold the office OF
Secretary of the Treasury for his four
year term; the other the inspiring state
ment issued by President Hoover and
| Prime Minister Macdonald as result
| of conferences over ornaments that
have produced an amity in relationships
TJSatfa GSTpat
Britain unequalled In several genera
| tons.
| While all of these influences acted to-
gether to encourage Wall Street, 1t was
| the fact that stocks had been oversold
| and were more acceptable as invest
ments than In months that caused them
to recover so quickly and in such re-
markable degree. The same was true
Of bonds. They had been driven down
| until they had struck solid foundation.
The easing of money was a secondary
| consideration in starting them upward.
| It happened that in botn cases outward
! conditions were favorable when the turn
| came.
It is quite probable that during the
| LIQUIDATION recently stocks passed IN
J large volume from weak into stronger
hands. Overextended pools, individual
operators and trading corporations re-
| with greater resources increased theirs.
| This is the natural ebb and flow OF
speculation. 1t keeps alive the suspicion
| that Wall Street always encourages the
| public to get in at the top while 1t Is
! selling out and waiting for later OPP
| portunities to resume Its operations
| from lower level.
Highly SeIective Market.
The market is still highly selective
one. From day to day this week nearly
| as many issues have declined to new
| low prices as have advanced into new
| high ground. There are scores OF shares
| representing different kinds of industries
| or promotions that have failed to rally
with the rest. This gives the market
a strong, bearish look when viewed In
| its entirety. The motor issues have
| acted badly. Aviation stocks have re-
covered slowly and comparatively little
when their maximum Shrinkage Is con-
| sidered. Various new chain store shares
| show the effect Of early exploita tion.
| So do those Of recently popular trading
| corporations.
The trouble with the motor securities
Is readily to be found. 1t lies In over
! production of cars by manufacturers
| competing with one another for gross
business when the markets are full OF
their own products The president of
the WHY'S Overland companies stated
the case frankly this week when he de-
| scribed the constantly rising mark Of
| output by the motor car manufacturers,
with the ability of the public to alb
serb new models greatly overestimated.
1t is the same situation In little
different form as has faced the textile
and building and allied trades in recent
| years. It may be isolated from other
business conditions or it may be a
! symptom of general but mild recession
| in industry not able to keep up the
| pace Of the past year. Certainly 1t Is
| too much to expect of 1880 that 1t can
| duplicate the earning increases Of 1929
| over 1928.
Money Situation Eases.
Temporarily, money conditions are
better than they have been so far this
year. Not only have call rates declined
to a point where they begin to look
unattractive to domestic and foreign
lenders, but time loans have dropped
half to quarters per cent. This
weeks Federal Reserve statement in
dictates that total bills discounted by
member banks have decreased about rs
per cent from the high point of 1929,
which removes further necessity for APP
plying the brakes in this direction. The
reserve ratio of all banks in the sys-
| tenn is now 74.4 per cent, compared
with SIS per cent a year ago. while
that of the New York bank is 8S:3 per
! cent, against 56.8 in october, 1928.
There is surely nothing in these fig
ures to cause alarm over credit; rather
| a basis for the claim that the Federal
Reserve should now begin to consider a
| reduction in its rediScount rate, and by
| so doing thaw out many of the frozen"
situations in securities In this country
| and abroad.
The time is an opportune one for
| bringing the bond market up out of its
depths and promoting renewal of in
| terest in strictly investment securities.
When high-grade industrial and public
| utility shares last week were at their
| lowest prices the average return on a
| selected group was only trifle more
| than half that on a similar number Of
| the best American railroad and public
utility mortgages. Since that time that
Secretary Mellon first advocated the
purchase of bonds last Spring, they have
! declined considerably while stocks have
| advanced, with the one group continu-
| ing q readjustment to a strained credit
| condition and the other rejecting the
concentration Of capital from every part
| of the world on them and competitive
| buying by corporations that had not
| taken out their charters in March.
Speculative Fever COOIs.
Some of the steam at last has blown
! off the stock market and calmer judg-
ments of the values of equities" are
now developing. A stock list Of which
so and so per cent showed declines
| for the year affected the minds and
] the pockets of great many investors
| and spectators and turned them to
thinking about securities that rest on
a strong foundation and give good
yield.