Evening star., 1936-03-29
BUSINESS RES|STS
SETBACKS BETTER
THAN SECURITIES
Markets React to Locarno
Smash.Up, Tax Plans
and Flood News.
YEARS STEADY ADVANCE
FORCES REST PERIOD
Closer Examination of Wall Street
Situation Necessary Before New
Commitments Are Made.
BY CHARLES F. SPEARE.

bI CnhhLGS r Oh IAHsEs
Special Dispatch to The Star.
NEW YORK, March 28.-The fac
tors that have most influenced busi-
ness and the security markets during
March are the proposed tax on the
undistributed surplus Of corporations,
the smash-up of the Locarno treaty
and the floods in the industrial centers
of the East. Stocks and small group
OF domestic and foreign bonds have
been at different times sensitive to
each of these situations.
1t is important to note that business
has been less affected than securities
as one or the other of these develop
ments appeared to offer a handicap to
recovery. This may be interpreted as
a sign that trade Is In healthy state
and that consumption of goods is over
taking production, while the effect OF
a years steady rise in stocks Is, tenn
porarily at least, to exhaust buying
power and to give occasion for closer
examination Of the Wall Street situa-
ton before engaging In further COM
mitments for rise.
Floods Leave Mark.
OF immediate interest is the extent
of the damage by the floods to iron
and steel and electrical plants in the
Pittsburgh district and to the great
textile industry in the river valleys OF
New England. From the former. steel
production dropped to AZ per cent OF
capacity, compared with As per cent
prior to the invasion of waters. In
the Wheeling district there was de-
cline from 80 per cent to So per cent.
For the industry as whole output
declined from 81 per cent to 81 per
cent. It Is now regaining some Of its
loss. Trade journals predict that it
will be back to the previous high OF
the year early in April. The recovery
will be slower in the Connecticut and
Merrimack Valleys.
The power industry was seriously
crippled in 10 States which experienced
most food damage. Only estimates
can now be made Of power output.
The chief sufferers among the leading
railroads were the Pennsylvania, Bal
timore g. Ohio, New Haven and Boston
& Maine. It will require the expendi-
ture Of many millions Of dollars to
replace washed-out tracks and bridges
and materials washed downstream.
Some Of the traffic losses will be per-
manent.
Already estimates are being made
Of the enormous amount Of new con-
struction required to repair the de-
stroyed business regions and of the
new equipment necessary to replace
damaged machinery. Pittsburgh looks
forward to the liveliest trade in her
products since 1929.
The building industry expects
an even greater boom than had been
predicted early in the year, for many
homes that were swept away or col
lapsed must be replaced. The amount
of highway repair, due to a hard Win
ter and the floods. Is tremendous.
This will compel more employment
and provide an outlet for thousands
now working on unnecessary Federal
projects. New burdens have been cast
on one section of the public and
taken from another. AS always hap
pens in such situations, there is q
shifting of incomes and of profits.
Whether the net result Is a minus or
a plus quantity remains in doubt.
Value Of Tax Plan Doubted.
The new tax bill is making slow
progress through Congress. It has
been found that 1t had been pre-
sented with little thought of the grave
problems which 1t created In corpo-
rate management by visiting on the
owners of property unfair penalties.
Exceptions" made in behalf Of
various tax-paying interests are being
suggested and allowed, with the re-
suit that the original bill has been
considerably modified.
Doubt creeps into the debate over
Continued on Fourth Page.)