Evening star., 1932-09-18
CORRECTIVE STOCK
DECLINE PUTSL LIST
ON F|RMER BASIS
Sharp Reaction During Week
Laid to 0verbought Con-
dition of Market.
COMMODITIES AFFECTED
BY DROP IN SECURITIES
Various Trade Barometers Give
Evidence of Slight Upturns in
Several Lines of Business.
BY CHARLES F. SPEARE.

|
occasion for the violent decline in
securities this week was not the un-
expected and significant turn in the
Maine election results or the refusal
! of the Interstate Commerce Commission
| to grant a satisfactory loan to the New
| York, Chicago & st. Louis Railroad.
| 1t developed out Of an overbought
condition in stocks and in Junior rail-
way bonds which these incidents
served to expose.
Markets have way Of correcting
, their own excesses. Without mucn
change. in fact, though with decided
| Improvement in sentiment, securities
had risen for two months until they
we're several hundred per cent higher
than in June and July. Intelligent
buying by investors had been followed
by indiscriminate purchases Of spec
ulative character. Numerous COM
modities had been advanced more on a
demand from those who were in
terested in quick profits than in the
statistics of production or Of visible
supplies.
Over a week ago it was obvious that
the buyers in all groups Of values had
overextended themselves and were be-
coming impatient as result OF the
slow progress of industry in supporting
CLAIMS OF TlSlllR VI
The Democratic gains in Maine on
Monday gave a slant on the presi-
dental election that Wall Street did
not relish AS it had other political
thoughts, while the curb to railroad
borrowing, which the Interstate Com
merce Commissions decision implied,
revealed the fact that the ghost of
railroad receivership again walked.
Share Prices Readjusted.
It would seem that the declines that
have now occurred all through the
list of speculative issues provide suf-
ficient readjustment in situation that
has improved but is still insecure. Ten
railroad stocks, all but two of the
dividend list, went from low average
$40 share. On Thursday they were
back to an average OF $28 a share,
still ITS per cent above the minimum.
Twelve moderate-priced tndustrias,
which daily have large turnover, rose
from July low level Of sl1.50 a share
to one that two months later was S30.50
a share. At an average of s2l so a
share this week, they had lost about
half of their gain. The same number
of public utility holding company COM
mon stocks, in which the much eX-
aggerated factor of Leverage" plays a
conspicuous part, advanced from a low
average of $3.50 q share to s21 share
and dropped to an average OF S12 a
share Meanwhile, 10 junior railroad
bonds. which had gone from an aver
age of 16 to 40, had fallen to "a, there
by losing about so per cent Of three
month appreciation.
Trends in the market for commodities
have nearly duplicated those in Sc
curities. Cotton has lost nearly half
of its Accent a-pound rise Wheat stub
bornly refuses to respond to repeated
efforts at speculative stimulation and
Is only a few cents above its lowest OF
the year. Corn this week has been sold
at prices that make the size of the
years crop a matter of statistical In
terest only. Obviously the reaction IN
commodities Is an important influence
on securities that have been swayed
violently of late by commodity move
ments, as well as on those industries
whose trade tides are frequently regu-
lated by the current prices OF raw ma
terials.
Downturn of Sentiment.
Business and banking judgment and
policy in financial centers Is too fre-
curities. So it is not strange that there
is less optimism today over the outlook
than prevailed fortnight ago. Some
of the problems of a domestic and in
ternational character that had been
forgotten while stocks and bonds were
! rising are again being given consider
alton. The Maine election and the
Legion's vote at Portland for an i'm
mediate cash payment OF the bonus
have revived fears of radical legisla-
ton by Congress this Winter which
may undo some of the benefits growing
out of the work of the various credit
protecting agencies established since
February.
The shadow Of the Unemployment
situation, and of Winter compelling
greater relief measures than have so
far been required, hangs over the
country. The political situations in
Germany and in Japan are as threat
ening as ever. No improvement has
taken place in economic coalitions in
South America. Government and cor
poration debts are increasing, federal
and local taxes are rising and the
purchasing power of the average
citizen is steadily diminishing.
Trade Outlook Better.
It is true that trade indications are
brighter. One prominent sign OF this
during the week was the sharp ad-
vance in the index of electric power
output This reflects greater expan-
sion in numerous small lines OF busi-
ness and unusual activity in small
group of industries. This month there
has been a decided pickup in branches
of the retail trade and moderate
revival in building construction. In
New York State there was a gain in
employment in August and a larger
percentage of increase in pay rolls. The
advance in commodities has been fol-
lowed by a rise in the prices of auto
mobile tires and shoes and in several
articles of a semi-luxury character.
This is one of the symptoms OF re-
covery In business, still confined within
a narrow area and resulting from the
conviction that the financial panic has
been weathered and that securities and
commodities have been completely
liquidated.
If subsequent developments support
this belief, and there is every reason
to feel that they WILL there is less
excuse for alarm over the prospect of
q change in the national administer ton
than Wall Street this week has re-
fected. The factors of low average
prices for securities, relative to their
year-in and year-out market values,
the small inventories Of merchandise,
the efficient management in nearly all
branches of corporation activity and an
entire absence Of anxiety over the posi-
tion of the dollar, 60 far to offset
the possible changes from legislation
that might be enacted by party pop
ularly supposed to be less friendly to