Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-04-19
DECLINE IN STOCKS
LAID TO UNCERTAIN
TREND in BUSINESS
Wall Street Sentiment Re-
mains Pessimistic, Despite
Signs of Recovery.
ALL GROUPS AFFECTED
BY STEADY LIQUIDATION
Industrial Shares at Lowest Level
of Year-Rails Below
1880 Figures.
BY CHARLES r. SPEARE.

NEW 4SEth, ApIlA 10 i ne uOHH-
ward drift in prices of stocks has con-
tinued this week at more rapid pace
and with an increase in the volume of
transactions. Scattered liquidation has
put in an appearance and has been a
factor in depressing market values.
Average prices for industrial shares are
at the lowest of the year and only to
5 points above those Of last December
A significant and disturbing tendency
lately has been the slunping OF leading
manufacturing company shares to quo
tationS approXimating those of 1926
1927. The average Of railroad stocks
has broken through the low average of
1880, with a number of the issues that
for while resisted the effect of divi-
dend reductions latterly among the con-
'picuously weak members OF their group.
The public utilities have so far main
tanned a fair proportion OF the recov-
cry to the middle of March and are
about points average higher than at
the end of last year.
The persistent decline in common
stocks is in itcelf a contributing cause
OF the growing pessimism. 1t no doubt
plays part in the unsatisfactory trade
returns. There is no pressure on the
market; no evidence of distressed SELL
ing has appeared. The financial dis
trict has been comparatively free of the
type OF runor that circulated freely
last November and December. But it is
again becoming apprehenSive and I'M
certain in its forecast Of the future.
Gain in Business Activity.
Evidence of many kinds supports the
contention that the low point in the
business depression was reached either
three or four months ago. Since then
fhnfa hooF1 q hut 4a6v1 10
in the quantity of business activity and
rather more than seasonable expansion
IN employment and in pay rolls. How
ever. the trend Is an uneven one, with
gains IN one major industry only help
ing TO balance the losses IN others. All
the time the effect of prolonged de-
preston working on the imagination of
those in industry and IN transportation
inclines them to an increasing amount
OF conservatism. which is finally re-
hected in the declaration of lower divi-
dends on their securities.
Just how far reduced dividends,
actual and probable, have been dis
counted in the prices of stocks is one
of the unknown quantities of the pres
ent market situation. 1t has been
pointed out this week in an analysis
by Col. Leonard P. Ayres that dividends
were advanced more rapidly in 1929
than in any previous year and that
even after the panic corporations con-
tinued to raise their rates of pay to
shareholders until well into 1880. So
far dividends have not been pared
down to the natural equivalent OF
shrinking net profits. As result we
have today between 10 and IL per cent
of the entire New York Stock Exchange
list selling at prices that return 10
per cent or more on the cost and about
40 per cent of the list giving yields of
to 10 per cent Within the last few
months stocks have been quoted at q
higher ratio of price to earnings than
they were at the crest Of the 1929
boom
Obviously there must be a more conf
plete adjustment in the market values
Of stocks to a reduction in dividends
and also in the number of dividends
to be reduced to the size of the cur
tailment in operating profits. Recog-
milton Of this fact has been more ap-
parent this week than heretofore, al
though only one important concern,
the Vanadium Corporation, passed its
dividend. On the other hand, the
Pennsylvania Railroad is making its
May payment at the regular rate. The
Vanadium action aroused more than
ordinary comment because Of the fact
that few weeks previously the COM
pany had offered for public subscrip-
ton an issue of $5,00o,0oo bonds, whose
immediate popularity and premium
were based on a convertible price then
within comparatively few points of
the stock. Subsequently the stock
dropped to a level about As per cent
OF that at which the convertible option
might be exercised.
Distributing Political News.
Political conditions in Europe and in
South America have disturbed the
minds of those holding and dealing
in securities and in banking credits
The overthrow of the monarchy in
Spain has been probability for some
time. The actual occurrence imme-
olately suggested a ferment in Euro
pean politics that might destroy much
of the improvement that has taken
place there in the past six months. In
asmuch as there are no American hold
1ngS OF Spanish securities, the political
developments were not accompanied by
violent movements in the market for
dollar bonds, such as those following
the German elections last September
and the several revolutions in South
America.
The resignation of the Argentine
cabinet and the policy of the National
Bank CT withholding support from Ar
gentine exchange, together with addi-
tlonal proof that the financial troubles
of Brazil, Chile and Australia have not
yet been Strengthened out. unsettled the
market for foreign obligations at time
when both common stocks and domestic
industrial and railroad bonds were UNI
der much pressure.
1t was to be expected that with all
OF these confusing and disturbing incl
dents the investor in securities would
be inclined to reduce his commitments
and postpone such purchases as he may
CONTINUED on Second Page.)