Evening star., 1936-02-02
SECURITIES CLIMB
FURTHER DESPITE
LAG IN INDUSTRY
Stocks Move Up Steadily
More Than so Per Cent
in Ten Months.
ALL GRADES OF BONDS
TAKE PART IN ADVANCE
New Issues Quickly Absorbed in
Rush for Outlets Better Than
Low.Yield Federals.
BY CHARLES F. SPEARE.


Special Dispatch to The Star.
NEW YORK, February l.-With the
January average rise in stocks the
largest since last July, the market for
equities" has now moved up, with
little interruption, for 10 months, dur
ing which its advance has been over
so per cent Industrial shares this
week were at a new high for this
movement: rails and public utilities
at the best prices in several years.
While stocks have been increasing
in market value. there has been a per-
sistent accumulation of all grades OF
bonds. In spite of the fact that the
average return on gilt-edged corpora
ton mortgages is we'll under 3l2 per
cent, all new issues are quickly abb
sorbed in the hunger of the institu-
tions for something in which to in
vest their funds at better than short
term Government rates. The list OF
second grade bonds stands higher than
for some time and recently defaulted
railroad loans have been the specula-
tive feature of the bond market.
Business Statistics Sag.
In contrast to the January rise In
securities was the reversal of the late
1885 trend in business statistics. BY
the usual measurements of trade. in
dustrial recovery late last year, accord
ing to the Federal Reserve Board, was
at the best figure since the Spring of
1890. In specific lines, it was higher
than in the period of imitation COM
plex in 1888. Between the end of Sep
tember and the beginning Of January
the trade index rose about 40 points.
It has since dropped points. This
is mainly due to the sagging condition
of iron and steel production, caused by
a slowing down of output by the au-
tomobile manufacturers and not yet
balanced by the anticipated increase
in orders from the railroads and from
the construction industry.
OF some advantage to the market for
stocks in January was the improve
ment in company earnings shown in
statements for the last quarter OF
1885, as. for instance, that of the
United States Steel Corp. and the dis.
tribution of larger profits by such
concerns as Westinghouse Electric ano
by important railroad systems, such
as the Pennsylvania, Louisville &
Nashville and Norfolk g. Western. In
dications that other carriers will bt
able to finance maturing obligations
and requirements for new capital OF
more advantageous basis than IL
several years added to the optimism
over section of the business world
that had long been neglected by in
veStors.
The main force under the stock
market in January, however, was thu
resurrected factor Of imitation, caused
by the unpromising outlook of the
national budget situation. This latter
on the other hand, was partly re.
sponsible for the slowing down il
business.
Danger of Reaction Reduced.
Ordinarily, stock market that ha.
been moving ahead for the greater
part of year, and during this periot
has appreciated by more than so PEI
cent, becomes technically weak. This
however, is more likely to be the cast
when active speculation on borrowed
money has occurred, involving thu
pyramiding OF paper profits, process
not now permitted. The danger of 6
sharp and sudden reaction is reduced
when purchases have been mainly fol
cash, as has been true of most of those
since last March. In either situation
there is always the element of over.
discounting prosperity and of push.
ing prices beyond reasonable rela
ton to earnings and income. This is
a condition that has already developed
in a considerable number of popular
shares.
It has been proved on several occa-
sions that the Roosevelt administration
is opposed to currency imitation as g
medium for meeting the extraordinary
requirements of the Government. II
is on the expectation of currency, ano
not credit, expansion that speculative
commitments in stocks have recently
been made. Secretary Morgenthau
has definitely stated that the needs oi
the bonus grant will be financed in ar
orthodox" manner.
It is reasonable to assume that Con.
gress will vote in favor of such g
method and not for the more business.
like policy of higher taxes. To penal.
ize one group of its constituency by
raising its taxes in order to advantage
the veterans would be poor politics
The 1897 Congress will have to dea
with this embarrassing subject.
Momentum Favorable.
More important to the Nation al
large than the future trend Of the
stock market is the probable course o1
business in the next few months. Tht
momentum of recovery is favorable
Continued on Fourth Page.)