Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-05-26
TRADERS CONFUSED
OVER STOCK TREND
Market Drops Ten Points
During Week-Recovers
Third of Loss.
BY CHARLES F. SPEARE.

shares down an average OF 20 pOlnlS De
tween May 10 and May %. The usual
secondary reaction" occurred Friday.
I The market is being let down grad
ually so that its reactions may not have
a disturbing effect on business. 1t still
has a reserve strength that cannot be
! ignored.
No recent week has produced such
| sensational episodes bearing on invest
ment and speculative securities as those
of the United States Supreme Court de-
cision on Monday In the ST. Louis g.
OFallon Railway case, and the refusal
Of the Federal Reserve Board to grant
the applications of the New York and
| Chicago banks for higher rediscount
rate and its rejection of a recommended
! ton by the Federal Reserve Advisory
| Council that the higher rate be made
| effective.
Two Contrasting Views.
The court opinion was one OF the
most constructive arguments protecting
! investment capital rendered in years
certain 1t is the most stimulating pro-
nouncement that has come to the ears
of railroad executives since the trans
portation act was inaugurated in 1920.
On the other hand. the Federal Reserve
Board has been accused of creating an
autocratic power in Washington to
regulate money rates, whereas the in
tent Of the trainers of the act was to
have a democratic administration of
| Federal Reserve policies.
June to See Funds Scarce.
The spread between the per cent
Federal Reserve rate and open market
rates increases. Sixty-day money is now
| nearly twice as high as Federal Reserve
| money. Acceptances are about l per
cent above the official rate. Tempo
rarily. call money has been easy. 1t
may be much higher in June and in
July. No one denies that the effect Of
meeting payments on approximately
| ST. ,000,0 100000 of new stock and bond
issues next month, experimenting the
normal demands Of June Is and July l
financing and disbursements, will create
a temporary scarcity of funds.
! The attitude of those who are privi-
| legged TO exercise the various rights"
expiring next month has undergone
| some change since new capital issues
were announced. The value of most of
these rights" has dropped off from
one-quarter to nearly one-half in con-
trast with the rising tendency of such
extras" last year. 1t has been notice.
able that stocks on which dividends
| have been increased have not responded
! favorably. Altogether there is a strong
suggestion that the public has about
all of the securities it wishes to carry.
or else 1t feels that 1t can increase its
holdings to better advantage at later
! time.
| This is clearly enough indicated in
| the motor group, which has made no
response to figures of March and April
| production or to higher dividends.
earlier than seasonal slowing down in
the nnnfNr iNduStrV this wear
Market Values Shrink.
There can be no doubt that liquida-
ton has been taking place in recent
SPECTATORS have been materially re-
duced.
At one time Wednesday IS per cent
of all the stocks quoted on the exchange
were at the lowest Of the year. The in
dividual declines from the 1929 high,
in shares that have been popular.
ranged from 20 to IS points Expressed
in another way, this meant shrinkage
in market valuations of from 10 to
nearly so per cent.
That the selling has not been confined
to any one. group of industrial shares
is indicated in such losses as IS points
in Chrysler, SIS In Anaconda Copper, IS
in Montgomery Ward, 40 in National
Cash Register, 30 in American Tele-
phone & Telegraph, 43 in Canadian
Pacific, 33 in Simmons Co., 81 in Sears
Roebuck. 20 in Kennecott Copper, 81 in
American Shelters, Is In Cerro dc
Pasco. "a in Radio. IS in Johns Man
vile, 35 in Hupp Motors 18 in General
Motors new, and 20 in United States
Steel common new.
There we're even larger individual
losses than these, such as 1876 points
In J. l. Case, which represented a 40
per cent decline, and over 200 points
in Adams Express. A significant
| market incident, and one rejecting not
| only the change of sentiment in recent
months but the overpromotion Of
stocks, was the reaction of from 20 to
young industrials that were marketed
with great eclat last Winter and to
which the public rushed for a free
ride" but has since discovered that 1t
actually paid high fare for Its specu-
lative journey.
Margins Deeply Cut.
Obviously, these reactions must have
cut deeply into margins, although
margins have been higher than in any
other bull market. Accounts that have
been covered to the unusual extent of
35 to so per cent have been reduced
to a basis lower than those that were
customary prior 70 1873 ana 1929. rms
has compelled the selling of a portion
| of stocks owned to protect the re-
| mainder. Such selling, together with
offerings to preserve existing profits
has had much to do with revising the
general price list.
There is still substantial and po-
tential buying power on which the
market may depend for support when
ever 1t becomes panicky. 1t would be
difdcult to analyZe the cause of this
weeks increase in the loans of Others"
when the average rate for call money
was the lowest In nearly four months
and at the same time the average of
/ Industrial stocks was Is points below
| that registered a fortnight ago. 1t
might have been assumed that the in
vestment trusts and the individual
! capitalists. who have money out on call,
would have withdrawn enough of 1t for
| market purchases to have reduced their
! total loans.
This may suggest that they do not
yet regard prices as sufficiently attrac-
| tive to make switch from a sure and
profitable investment into a speculative
! proposition. However, the funds are
there and will in time be employed
! Whether they will leave the call market
for the stock market before the aver
| age call rate drops below per cent
and there is established in the lenders
mind consciousness that the period
" high money liz over can only be
determined as the facts develop.
|
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