Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-08-02
Reduction of Steel Company
Dividends Proves Bearish
Market Influence.
FINANCIAL COMMUNITY
NOTES SIGNS OF PICKUP
Some Lines of Industry Give Evil
dence of Favorable Turn and
Better Prospects.
BY CHARLES F. SPEARE.
,cial Dispatch to The Star,

Special Dispatch to The Star.
NEW YORK, August 1T takes ar
tncurable opttmist to find any comfort
in the tangible developments Of this
week in the financial world.
In the first place, there was the cul
OF over 40 per cent in the common
dividend of the u. S. Steel Corporation
a so per cent reduction in the disburse-
ment on the common shares of the
largest independent steel maker, and
second quarter earnings statements oil
both, which showed their respective pre-
ferred dividends unearned, If the spe-
cial and homecoming profit Of the
Steel Corporation be left out of account
Abroad the Bank of England advanced
its rate full / per cent on top OF a
similar rise the week before, emphasiz-
ing the unsettled condition on that side
To make the picture still more drab
the chief commodity markets have con-
tinued their decline, with record lows
in both cotton and wheac-in the case
Of the latter price per bushel I'M
equaled in the history Of the Chicago
Board of Trade. Foreign dollar bonds
and domestic fixed interest obligations
Of every grade below the gilt-edge type
have been heavy at the best and weak
at the worst. Taking 1t all together 1t
makes a poor foundation for cheerful
ness.
Change In Sentiment.
And yet the reaction OF Wall Street to
all this has been very different from
that prevailing in the other dark pc
RODS Of the year. The Two most critical
days to date have been June 2, when
the stock market made what was up
to that time its lowest average price for
1881 on a steady stream of liquidation,
which was all the more ominouS be-
cause no specific reason could be as
signed; and July %, when the German
crisis was most acute and when there
was a sudden break in sterling ex-
change. On these two occasions Senti-
ment was more depressed than 1t had
been at any time since the 1929 panic
and than it has been at any time since
This week the feeling Is in striking
contrast. There is concern over thu
unemployment situation, which seem:
to be getting worse instead of better
there is anxiety over the plight OF the
railroads and there is disappointment
over the failure of the so-called heavy
industries to make progress out o.
the depression; but there is NJ
such unreasoning despair as there was
in early June or even fortnight ago
For this change of attitude 1t is hard
to give a satisfactory explanation. Prob
ably it is mostly psychological. A sponge
will hold so much water and no more
and the financial community has been
saturated with peSsim1Sm and is unable
to absorb any more.
But there Is another possible inter-
probation and it may be that this alter
native is sensed evea If not reflected in
the market. Goods are moving into
consumption, in some lines faster than
in months past. Here and there an in
dustry lifts it head out of the slough OF
despond. Noteworthy in this particular
are the shoe and the wooden trades
Sugar has ASSOCIATED itself from other
commodities and has been strong when
they were weak. 1t is little early to
say that the Chadbourne sugar restric-
ton plan has succeeded where every
other attempt to control a market has
failed. but the fact remains that the
outlook for sugar producers Is better
today than 1t has been in years.
Bright Spots in Trade.
The chain stores labor under the
handicap of an organized opposition
which shows itself in attempts to i'm
pose discriminatory taxes, but their sales
are increasing. The automobile COM
panies have made surprisingly good re-
ports in spite of a falling of In sales
as compared with a year ago, and the
financial position of the leaders in the
industry Is impregnable. It has been
repeatedly objected that with a down.
ward trend in salaries and wages, the
demand for motor cars must fall of
The fact Is, however, that the low-priced
cars at least are being bought regard
less of the business situation or any
thing else.
Turning to the stock market, we find
prices trending downward, with the
probability of testing the June lows.
Professional sentiment is only bearish
on the principal industrials, especially
the higher-priced ones, and on the rail-
roads. The argument is that the divi-
dend reduction by the United States
Steel Corporation will be followed by
cuts in other dividend rates. Neither
Bethlehem or United States Steel, it is
said, can continue disbursements out of
surplus Indefinitely. If that Is the case
with corporations SO well entrenched,
others less strong must certainly reduce
or omit entirely distributions to their
shareholders.
The feeling is stronger with regard
to the railroads. Even If they should
secure the hoped-for increase in freight
rates, 1t would come too late to save
the day, so far as present dividends are
concerned. The stock market takes its
cue from the bond market, and there
has been almost no institutional buying
OF railroad bonds except those that are
so strong they could 60 through reor-
ganization undisturbed. The middle
and second-grade issues are left for the
dealers to carry. That being the case
with the bonds, the stocks have received
scant support.
Stocks In Strong Hands.
Nevertheless, this weeks market has
been stronger than 1t looked. In the
other major declines of the year stocks
have gone down together, all groups
going in the same direction. Now there
are individual issues which stand out
unaffected by the weakness in the rest
Of the list. It is no longer possible to
brighten holders of stocks representing
stable earning power and an improving
position into hquidating because there
Is selling elsewhere. It is truer than
ever today, trite as 1t seems to say 1t,
that stocks are in strong hands. The
brokers' loans statement this week,
showing the total at another new low,
is proof enough of that statement, If
any were needed.
It would take only comparatively
Sight betterment in the industrial news
to bring about hurried short covering in
the stock market. The short interest
prior to the u. S. Steel meeting was
not especially large. It Is believed there
has been some selling Of stocks against
the box" which accounts for the high
premium charged theSorrower. but pro-
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