Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-06-08
REACTION IN STOCK
market DISCOUNTS
SLUMP IN BUSINESS
Prices End Week Well Above
Previous LeveI-Trading
Very Small.
COMMODITY PRICE DROP
CONFINED TO FEW ITEMS
Money Rates Go Lower as New
Government Financing Is
Announced.
BY CHARLES F. sPEARE.

Special Dispatch to The Star.
NEW YORK, June Tn a market
of such small proportions as that of
this week, movements in individual
issues or in groups of stocks are likely
to have an exaggerated significance
among those who are following price
trends for the purpose of making new
investments or shifting from one posi-
ton to another.
In size the market has been about
the equal of that of last January, when
speculation was also at the irreducible
minimum, but average prices for all
of the major groups-that is, the in
of earnings issued since last Saturday
we'll above the level of that period.
Compared with a week ago the list
is about 10 points down. This Is not in
itself serious. Considering statements
of earnings issues since last Saturday
and the number of unfavorable dividend
changes, this moderate reaction in
business recession have been well dis
counted.
Leading Stocks Affected.
The significance of the decline lies
In the market status of the shares
affected. These include prominent
equities" on the New York Stock Ex-
change and on the New York Curb,
as well as issues that have a large fol-
lowing in interior markets. It also
embraces the stocks of banks and trust
companies and Of conspicuous members
OF the investment trust groups. OF
quite as much effect in creating bear
lsh sentiment as the weakness in United
States Steel, General Electric, Anaconda
Copper, American Telephone, Electric
Bond 81 Share and leading investment
rails, has been the action of such widely
distributed stocks as United Founders
corporation, Pennroad Corporation.
Iransamerica Corporation, Marine Mid
land, Goldman Sachs Trading Corpora
ton and its affiliated companies.
1t Is just beginning to be realized
That 1t IS one thing to bring together
a miscellaneous assortment of SECURE
ties under individual control, but an
other to maintain the price of the
stock of the holding company when
those of its constituents have a per-
slstent tendency to adjust themselves
TO a basis OF actual earnings instead of
that fixed by competitive bidding for
them. At such a time also the COM
pIex1ty OF these corporate situations is
a handicap In the marketing Of their
securities with investors on account of
the difficulty of relating the different
parts OF the corporation to each other.
Business Reports Mixed.
The business picture is not much
changed from that in the second half
of May. Commodity prices are still
falling, although the drop in the index
both here and abroad Is due more to
the severity of the decline in a few
items, such as silver, rubber, tin and
silk, than to the earlier moderate
shrinkage in quotations of large
number OF commodities, including ag-
ricultural products. In some sections
of the iron and steel price list there
have been important advances of the
sort that additionally indicate an up
ward trend elsewhere. inventories
are gradually being reduced. There are
distinct evidences of improvement in
sections of the retailing world, with
more seasonable weather.
On the other hand, many industries
are reporting sharp decreases from the
week sees the cumulative effect of the
week sees the cumulating effect of the
depression on dividend policies. Rail-
road car loadingS most recently report
ed indicate about 10 per cent reduce
ton from the same period in 1929 and,
with one exception, less merchandise
and heavy tonnage traffic than in any
year since 1922.
Roads Stick to Programs
When railroad executives compiled
their budgets for 1880 and agreed to
assist the Government in carrying out
its program of maintaining wages and
continuing to spend the normal amount
for improvements, they anticipated
period OF few months during which
gross earnings might decrease from 10
to IL per cent from the previous
years level. They did not anticipate,
what they now realize, that they might
be compelled to face nearly a year of
restricted business. Until recently they
Just as If they were experiencing the
regular seasonal flow of traf1c. Con-
sequently, % have seen decreases in
net operating revenues about three
times as large as in gross receipts.
An analysis of the operating figures
of all the important railroads for the
first quarter of 1880 indicates that
they have carried out their promise
to the Government and, in spite of
earnings, have spent almost as much
on maintenance of way and mainte-
nance of equipment as in the first
three months of 1929
From now on decided change OF
policy may be expected. The rail-
roads feel that they have played their
part and have an obligation to their
shareholders quite as important as to
others. Naturally, having spent much
more last Winter in proportion to earn
ings than ordinarily, they are now in a
better position to curtail these oper-
ations and can do so with less dis
turbance to the labor market than If
they had reduced their forces when
unemployment was general. So, while
railroad gross earnings will undoubtedly
90 on falling, the net decreases in the
coming months should be smaller and
less disturbing to security holders.
Money Rates Lower.
The effect of restricted industry and
restricted. security markets is visible
this week in lower rates for practically
all forms of long-term money. The
spread between acceptanceS and the
Federal Reserve rediscount rate in New
York has increased to three-quarters of
1 per cent. AS a means of stimulating
business or securities, a reduction in the
rediscount rate to 21a per cent would
be no more effective than was the cut
from per cent to 3 per cent here and
in. London.
There might be some advantage in 1t
to the Government in the refundinR Of
the June is Treasury certificates, the
terms Of which have just been an
(oopyrisht 1900