Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-01-26
Recovery IN STOCK
MARKET RESUMED
Averages Are Now at New
High for Present Year.
Credit Easier.
BY CHARLES r. sPEARE.

Special Dispatch to The star.
NEW YORK, January 25.-Some col
or has returned this week to the faded
features Of the business situation. There
Is hope where there was despair. Plan
ming for the future has been resumed.
Trade statistics provide specific facts
Of recovery In industries that during
December dropped to the lowest pro-
ductive levels for the month since 1922
Employment Is expanding instead of
contracting. Investment and specula-
tive markets have been refreshed by the
glow that has come over the recently
gloomy industrial world and average
prices for common stocks are now at
the 1890 high.
1t may be that convalescing business
and Wall Street win try to. get up and
on their feet too soon, as they did in
early December. and so suffer q reac-
ton. Both are eager to start OF on new
campaigns and are impatient Of delay.
They are just little overstimulated by
artificial methods Of reviving trade and
by making money as cheap as possible
in the large centers Of the country.
Permanent health would be better es-
tablished through q slow but. gradual
recuperation. This does not suit the
temper, however. of the American peo-
pie, who demand bigger turnovers year
by year and fret when faced with tenn
porary reaction.
improvement in Steel Industry.
e. II the iron and steel trade Is. still the
most accurate barometer of American
| industry we have, then 1t may safely be
| said that there is fair weather ahead.
The Improvement In this trade within
q month has been notable. Out Of it
comes much OF the change in sentiment
! that has been obvious in many direc-
| tons this week. From ratio of 40 per
cent in steel ingot production in De-
cember there has been q recovery to
about 10 per cent. This compares with
SO per cent In the corresponding week
| up to rs per cent, while the Bethlehem
| Steel Corporation reports Q rate of "A
| per cent as against S6 per cent IL
! months ago. It Is significant that In
| the flnal quarter of 1929 this company
had net earnings only per cent below
those Of the extremely active three
months that ended on the eve Of the
stock market panic.
/ The measure Of the recovery in in
dustry has been exaggerated, just as
the violence of the trade recession after
0s
ly accurate to say that business and
industry are now nearly normal" Both
are long ways from producing the
volume OF gross earnings which they
were developing during the frst hall
Of last year. There are still many de-
pressed industries and not q few acute
business situations.
The latest railroad car loading flg-
ures available show, substantial reduc-
tons from mid-January totals in 1929
and 1928 and only about half as much
increase between the first and second
| weeks of this month as in the same
period two years ago. A business re-
ceSsion so sudden and sharp as that
In November and December, and de-
scribed by Secretary Of Labor Davis as
'the worst we have had in years, y
would be expected to develop some pro-
nounced recoveries similar to those
that took place in groups Of stocks
that had been unduly debated in the
1 Autumn panic.
Business FOundatinos Sound.
The extreme violence Of the decline
! In securities and in the volume OF
trades most sensitive to q speculative
breakdown should normally mean q
| quicker recovery than where there had
been q long period of Liquidation and
q eliminating crisis. It Is more and
more being realized that the panic of
last November was mainly a stock mar
ket affair. While 1t took q terrific toll
from the American people of moderate
| means and Of great wealth and set
some institutions back SO that il viii
be years before they fully recover from
! 1t, 1t did not seriously affect fUnda-
/ mental conditions. The banking situa-
| ton Is sound, corporations are less in
| debt than they have ever been, and
| there are fewer instances Of business
being mixed up with speculation than
in the past.
1t Is nearly two and one-half months
since stocks had their last great crash.
So far there have been no Wall Street
failures Of Importance growing out Of
1t. The, only conspicuous irlvolvment
between business and what might be
termed speculative expansion is that
represented by the Fox Film Corpora
| ton. Year-end balance sheets will
probably show instances where business
men have been using their capital In
stocks to the detriment Of their credit
and 1t would not be surprising II
there were some fair-sized commercial
failures within the half year.
Two Types Of Stocks Sought.
Allowing for all this, it is apparent
that the low point of the depression has
been reached. and that the country is
now on the upgrade and should make
steady progress, The most conservative
industrialiSts and bankers expect to see
trade conditions quite satisfactory In
the early part of the Summer. On this
basis Wall Street Is already beginning
to discount the recovery In an accumu-
lation OF stocks of two types.
The firSt Is represented by what were
known few months ago as the blue
chip" issues, or those identified with the
leading industries, public utilities and
railroads of the country and long estab-
nshed on dividend basis. The second
group includes the low and moderate
priced shares which were greatly de-
Mated In the panic, and are now quoted
at only one-hah to two-thirds Of their
1929 market values.
In this second category there are
from 22S to ESQ separate issues listed
on the New York Stock Exchange and
quoted between $40 and $50 share.
About half are on q dividend basis.
Their yield ranges from and to Q
and 10 per cent, so they much more
than carry themselves: Granted that
reasonable to expect this. As business
becomes more stable they will show
larger profits and work back toward
the level from which they dropped,
though it would be unreasonable TO exc
pect them soon to sell at their former
prices.
Paper Losses Stin Visible.
The blue chip" stocks are also much
below their high quotations Of last year.
Many Of them are points away from
the prices of nAcemhAr when the