Evening star., 1932-03-28
MARKETS AWAITING
BALANCED BUDGET.
Decline In Securities Laid to
Failure of Sales Tax
Legislation.
BY CHARLES w. STORM.

Rditor, the News Service Of Wall Street.
Special Dispatch to The Star.
NEW YORK, March 28.-The sharp
decline in stock market prices Satllr-
day registered the Streets disapproval
OF the defeat Of the manufacturers
sales tax provision of the revenue bill,
thus forcing another delay in balancing
the Nations budget.
Important economists and bankers
have been emphasizing the necessity of
balanced budget before genuine i'm
provement in the market for securities
can be expected. President Hoover rec
ognizes the Importance of this problem
and has declared that the budget must
be balanced. But the President and the
Lower House seem unable to agree upon
the method
The probability that a protracted
delay will now ensue regarding the bal
ancing Of the budget is perhaps one of
the most depressing influences on the
securities markets at this time. The
seeming policy of soaking the rich"
adopted by the House Is not conducive
to Improvement in stocks and bonds.
Depreciating Dollar.
Marked improvement in foreign ex-
change rates on Saturday followed the
defeat Of the sales tax provision of the
revenue bill. Improvement in rates of
exchange on Europe was declared by
international bankers not to be due
primarily to improvement in the Euro
pean financial situation, but to Europe's
manner of showing its deprecated idea
of the American dollar.
There also was noticeable increase
in the selling of American stocks by
Europe, another indication of the un-
favorable view now taken Of American
stocks as result Of the inability Of
the American Government to balance
its budget.
The English are reported to be SELL
ing American securities and reinvest-
ing the proceeds in their own stocks
and in sterling exchange.
Railroad Securities.
The average price of 20 railroad
stocks on Saturday touched a new low
level for the bear market. This was
considered a depressing sign.
Because of the recent freight rate
advance and the railroad wage reduc-
ton it had been expected that the Feb
ruary reports of earnings of the COM
mon carriers would mark a reversal OF
the downward trend in their revenues.
Initial statements Of earnings for that
month seemed to lend color to the ex-
pectation, since they showed improve
ment, but the publication of most Of
the reports coming to hand continue to
show a steady shrinkage in revenues.
This revives expectations that there
will have to be more reductions and
omissions of railroad dividends despite
the fact that the Reconstruction Finance
Corporation Is relieving the common
carriers OF pressing financial burdens.
Industrial Reports.
Further changes in dividends and In
many instances omission of payments
to shareholders are expected because of
the showing Of earnings to be made by
many industrial corporations for the
first quarter of this year. Estimates al
ready have been made Of the probable
showings, and with but few exceptions
the figures disclose substantial reduc-
tions compared with the same period
year ago.
These figures would not be quite SO
dlscouraging we're it not for the fact
that as yet there are no signs of i'm
provement in general trade and indus
try. Spring improvement in business so
far has not materialized. There is
some hope, however, that 1t may appear
later than usual, but these hopes are
not based on anything tangible.
Credit Conditions Better.
Improvement in credit conditions
throughout the country is reported, par
ticularly inland. This is reflected by a
lessening of bank failures and the re-
turn of funds to banking institutions.
Evidence Of this is appearing in the
increased demand for high grade bonds
by country banks, which a short time
ago were the principal sellers Of bonds.
Necessitous Liquidation.
Liquidation of an urgent character
again is appearing in stocks. 1t Is due
to many reasons, the most important of
which is the diminished confidence in |
the future of the market because of the |
controversy now on in the House and !
the fact that many owners of securities |
by reason Of need for liquid funds are |
disposing Of part Of their holdings at !
losses.
However, toward the end of the week, |
there is a possibility of a substantial |
rally by reason of the fact that on Fri |
day the Stock Exchanges rule prohibit !
ing the lending Of customers stocks |
without the latters., consent goes into
effect.
This may cause perceptible shrink
age in the volume of stock available for
borrowing by the short interest and
precipitate a covering movement.
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