Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-03-15
decline IN STOCKS
PUTS PRICES UPON
FAIR YIELD BASIS
Effect of Long Depression
Revealed in Recent Cor
poration Reports.
| INTERNATIONAL MARKET
POSITION IS IMPROVED
Seasonal Gains in Industry Raise
Hope of Better
Times.
BY CHARLES F. sPEARE.


Special Dispatch to The Star.
NEW YORK, March 14.-Common
stocks this week have been priced more
in line with what they yield and what
they pay and with respect to probable
earnings on them in the first half of
1891. Wall Street, UP in the clouds re-
Gently, has now come down to earth,
taking a more practical If less opti-
mistic view of conditions that currently
surround and influence the market for
securities.
The Street has had some severe
shocks in the last few days, such as
the reduction in the dividend on New
York Central Railroad stock to So a
share the day after new issue of
SIS, 100000 of AZ per cent bonds had
been publicly offered by the company.
1t has also read and analysed with dis
may the annual reports of number OF
the leading manufacturing companies.
which possibly could be dismissed as
having been discounted in the stock
market If it were not for the fact that
the preliminary estimates for the March
quarter of these same concerns suggest
even less income for dividends or fixed
of 1880.
Not so many dividend reductions
have been announced as a week ago.
The character of them, with the ex-
ception Of New York Central. has been
less important. Unfortunately, how
ever, the readjustment in the rate of
payments to shareholders to current
revenues must go considerably further.
Next week it is expected that the divi-
dent on Baltimore g. Ohio common
stock will be reduced from 81 a share
to IS. From present indications the
rate on Westinghouse Electric common
stock will be lowered the week follow
ing. The effects of nearly two years
of depression are now beginning to
show in the policies of the strongly
intrenched corporations just as in this
quarter the public utility companies
are. for the first time, expressing in
their figures of electric power produc-
ton and in those of gross operating
revenues a diminishing demand in
nearly all industrial and in most of
the agricultural sections of the country.
Course Of the Market.
What has happened in the stock
market since the first of the year needs
some Interpretation. 1t had been over
sold in November and December in
about the same degree that it had
been overbought the year previous. The
average yield on common stocks had
advanced from AZ per cent in Septem-
Der, 1929, to 912 per cent on Deem
Der II, 1880. The public had liquidated
the stocks which it was carrying on
borrowed money. The guerrillaS of Wall
Street, whom the Stock Exchange, for
some reason, seems willing to harbor,
had exhausted their supply Of vicious
rumors about corporations institutions
and individual firms and, in the YER
nacular Of the Street. were short up
to their necks." Selling for the pur-
pose of establishing income tax losses
had been completed at the end of De-
cember. after reaching proportions
never before realized. It's effects will
make a serious dent in the income tax
payments now due. Cash buying by
bargain hunters" was enormous and
persisted for weeks.
Technically, therefore, the market
was entitled to substantial recovery.
This it. had between the middle of De-
cemher and the oath of February. In
dustrials moved up an average of 81
points rails 20 points, and public utili-
ties 10 points. The improvement was
based more on the establishment Of a
better public psychology, as the banking
signs of substantial pickup in busi-
ness. The first quarter Of the year is
nearly over. Instead of showing gain
in corporation profits, which had been
anticipated, it reveals a decline in many
directions to lower level than in 1880.
Conditions in the railroad industry,
for example, show no improvement, al
though from the violence of the decline
in earnings last year they might reason
ably have been expected to develop a
rising trend. In January, however net
operating income was 40 per cent below
that Of the same month in 1880 and SIS
per cent less than in January, 1929. It
was so per cent smaller than in the first
month Of the years 1928 and 1926. Pre-
limiary figures for February are not bet
ter. March car loadingS, with slight ex-
ceptions in some commodities and for
certain localities, indicate that operat-
ing results this month will contribute
little TO dividend payments. AS a result
1t Is probable that a 1ajority of the
dividend paying roads of the country
will have to make a concession to the
present business circumstances, and one
to the disadvantage Of their share
holders.
Conflict of Market Forces.
Railroad stocks have now lost about
go per cent Of the recovery that took
place in them in the early part OF
the year. 1t is somewhat dificult to
determine whether sufficient adjust
ment of prices to new dividend bases
has yet been made in either rails OF
industrials. While we have what seems
to be weak situation from the stand
point Of statements that reflect the
terrific drop in corporation profits last
year and the failure TO recover so far
in 1881, there is, on the other hand, the
strongest market status, internally, that
has been developed in several years
For the next few months the market
is likely to reflect in its irregular move
ments the conflict of these two forces
It will only require a slight change in
the business situation, either upward
| or downward, to make one or the other
dominant later on.
Such improvement as has been shown
| in industry is of a seasonal character
This is reflected in an advance. in en-
ployment in February, characterized by
the Department of Labor as "the first
satisfactory indication of a general up
ward trend since the stock market col
lapsed in october, 1929" There should
be further gain in employment In
March and even larger additions to the
ranks of those at work in the Spring
months. Up to, the present time most
of the public Improvements, for which
| huge appropriations have been made
by the Government and by States and
municipalities, have been in the blue
print stage" Many of them are now
where they can provide immediate Jobs
-