Evening star., 1936-05-03
Spectators Wonder if
Technical Readjustment
Has Been Sufficient.
BROAD RECESSION MARKS
END OF LONG UPTURN
Weeks Slump Carries Stocks to
Years Low, but Speculative
Bonds Prove Resistant.
BY CHARLES F. SPEARE.
ecial Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, May 2.-There have
been numerous reasons given for the
severe decline in the stock market
this week, some Of which dealt with
conditions present while prices were
rising during the preceding three
months, but which were then ignored.
The simplest explanation for the
sudden and abrupt change in specu-
lative sentiment is that the market
had been advancing for over a year,
that it had, in this period. gained an
average of so per cent. that popular
industrials had outdistanced the re-
covery in earnings and had anticipated
too much for the future, and that, as
always happens under such circum-
stances, those with profits became un-
easy. and, in seeking to realize the
profits, found thin market in which
to sell.
Wall Street invariably ruSfnes past
the danger signals set against markets
and then wonders why there should
have been a crash.
Stocks at Years Lowest.
April was the first month since
March, 1885, in which stocks lost
ground. The average decline repre-
sented the widest change in the l3-
month period. 1t brought to a con-
clusion the fourth advance in stocks
since 1892.
In that year, again in 1888. and in
1884. there were shorter and less vio-
lent upward surges in the price list.
This weeks decline carried stocks to
the lowest level Of the year.
The question now is whether the re-
adjustment has been sufficient to cor
rect the weak technical factors from
which the market has been suffering
and whether it is again in what the
students of speculation describe as
buying area"
1t is important to note that, while
speculative bonds have also declined
sharply, the general average of cor
poration mortgages and debentures is
only three points below the best of the
year. On the other hand, Govern
ment and municipal issues hold their
ground and new offerings find a ready
market at low coupon rate and a
high premium.
Indices Point Upward.
Reviewing the domestic business
situation, one does not find in it any
change that would justify anxiety on
the part of those who have purchased
securities for investment. All of the
recognized indices of trade point up
ward. Iron and steel production has
risen this week to 50 per cent of ca
pacity after a pause in this trend the
week previous.
The picture that must be drawn of
affairs in Europe is not so bright. 1t
has a threatening aspect. In France
Is the prospect of strong left govern
ment after Sundays elections and con-
sequent policies toward French bank
ing and currency that might tempo
rarily have disturbing effect on in
ternational markets.
In Spain, Communist faction is
taking control of the government.
Austria is moving troops to the border
in anticipation of a Nazi threat of
occupation.
Poland has been forced into extreme
measures to protect her money, and.
in devaluing the zloty, has divorced
herself from the gold bloc"
In Germany the authority Of DR..
Hjalmar Schacht as economic minister
has been modified by the appointment
of Gen. Georing, who knows little
about financial matters, as dictator
in the realm where DR.. Schacht has
ruled and kept German currency stable
against tremendous Odds
The strain on Italy of the Ethiopian
war will be more apparent with its
end than before.
The political as well as the financial
area of unsettlement in Europe has
been rapidly widening in the last
six weeks, during which the American
market has been absorbing stocks sold
by foreigners who were turning their
profits into cash, preferring liquid
position while watching the move
ments Of events on the continent.
Domestic Factors Emphasized.
Coming back to the stock market
and the causes of its decline, it may
be said that, while it had discounted
or overemphasized the benefits of
domestic business revival, and had
pushed up the prices of certain in
dustrial shares 80 to 40 and some so
times their earnings tissues paying
and 2 per cent dividends selling
from 100 to 1901, it had not, until a
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