Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-07-20
OPTIMISTIC VIEW
|. LENDS STRONGER
TONE TO MARKETS
Belief That Reduced Earn
ings Have Been Discounted
Boisters Purchasing.
INDEX OF 90 STOCKS
HIGHER AT WEEK END
Group Trends Are Distinct on Fear
of Reaction Similar to That
Of Last April.
BY CHARLES r. SPEARE.

NEW YOtth, July 1S.-1C Is Win q
less agitated feeling that Wall Street
now receives the daily grist of unfavor-
able business news. It believes, APP
parently, that reduced corporation
earnings and dividends, falling COM
modify prices, smaller exports and cur
tailed employment and wages, affecting
purchasing power, have all been freely
discounted in the shrinkage in stock
prices during the past two months.
Consequently, sentiment is moderate
ly cheerful. There Is less disposition
to believe that the country is going to
wrack and ruin.
This more optimistic viewpoint, char
acterizing the first half of July, has
developed stronger and broader markets
for securities and led to the repurchase
of stocks recklessly iquidated last
month. A consequence of this was the
Improvement on Friday of Standard
Statistics index Of 80 stocks, based on
100, to 1923, the high point of the
current movement.
Group Trends Distinct.
The effect Of q stronger technical
market situation, produced by the
clearing up of weak accounts carried
over from the November panic, and
the creation Of a large short interest,
is tempered by the fear that stocks may
make false start, as they did in April,
and suffer another decline If the BUSH
ness of the country in September or
October does not show signs of sub
stantial Improvement. So we have to-
day, and probably shall have through
the rest OF the Summer, irregular move
mentS OF prices and quite distinct
trends in different share groups.
Next to the railroads, no group of
companies has suffered such q decline
In earnings as the automobile manu-
facturers. In June motor production
was 40 per cent under the same month
in 1929, and for six months it de-
creased 80 per cent. In q like period
exports OF automobiles dropped $780,
100000 Factories are running on short
time or are closed. Earnings for the
September quarter will be poor reading
for shareholders.
Return on Capital Attractive.
Notwithstanding this actual and pro-
specttve situation, 1t Is evident that a
considerable body of investors believe
that motor stocks have discounted the
future and that the return on capital
that lead the trade juStifleS the risk
involved. 1t is to be remembered that
such concerns have followed q policy
of enlarging their properties from earn
ings and have little. If any, fixed debt
They have built up large cash re-
sources.
For years General Motors has shown
an average of 40 per cent in cash and
marketable securities over its total pre-
ferred stock. Nash Motors, while lib
eral with its dividend, has nevertheless
been thrifty. In spite Of poor six
months, which compelled the first re-
duction in its dividend, 1t showed
nearly $4,000, 900 in cash and Securi-
ties at the end of May. Other concerns
in the industry are relatively in as ia
vorable position.
Commodities Find Buyers.
In the field Of commodities we find 9
new boldness among buyers. While
they are not convinced that prices have
touched bottom-in fact, they are in
clined to believe they may go several
per cent lower which would mean Q
is per cent drop from a year ago-they
are willing to take their chances on
raw materials at the present levels
This has led to increased demand fol
copper metal from the electrical COM
panies, which are working it up into
finished materials for which their Is no
immediate market, but which they can
afford to hold on the basis of cost. II
has likewise impelled such large dis
tributors as Sears, Roebuck g. Co. and
Montgomery Ward to enter the market
and to pass along to their customers
the benefits of a wholesale price aver
age the lowest in Is years.
The adjustment of retail prices to
| the decline in wholesale prices is pain
! fully slow to the man whose income Is
falling either from unemployment or
| loss of dividends. This and the current
wage reductions undoubtedly explain
the unwillingness to buy many semi
essentials, causing the sharp June de-
| cline in both chain store and retail de-
partment store sales.
Investment securities rave benefited
this week from the prevailing low rates
| for money. These have permitted the
Government to sell another batch of
| discount bills at rate passed on TO the
consumer at a 134 per cent yield. Moth
| ing like such easy credit conditions has
been witnessed in years. Still they
| have failed to develop the quality OF
| investment market that should have
| grown out Of the present money glut
| The Street saw in the somewhat heavy
selling of short-term high-class securi-
! ties on Friday, which conceded with
a hardening of prime long term bonds
a turn toward long-term investments
that may result in the long-awaited
| general advance in these issues.
| (CopyriRht. 1e30)
1 A.