Evening star., 1936-06-30
TRADE RISE PACED
BY STOCK MARKET
IN LONG UPSW|NG
Thirteen Months Advance
Comedies With Trade
Improvement.
BY GEORGE r. HUGHES.
RxeciaI Dispatch to The Star


erecial Dispatch to The Star
NEW YORK, June 3o.-The stock
market history Of the last six months
falls naturally into three phases.
First, there was a continuation Of
the long rise that started in March.
1885, and ran roughly for IS months,
almost without interruption. cul-
minating in the first week OF April,
1886.
Next there was the reaction which
was very sharp and ran approximate
" to the first of May, and finally
there was a slow, halting and hesitant
recovery which by late June had re-
placed practically all the ground lost
taking the list as a whole.
The market was still in testing
stage, with the indications favoring
another upward movement.
The 13 months advance was one Of
the most persistent in the history Of
the exchange. 1t kept up long after
experienced traders had predicted a
break. Measured by standards of the
past, the rise was accomplished on
moderate volume, although compared
with the turnover that obtained after
the reaction, 1t was large.
Adequate explanation for the appre-
citation in prices was found in the
progress of business and the best rea-
son that could be assigned for the
lack of intermediate setbacks was the
effect of Government control. That
factor became more potent later on
but 1t was prominent in the entire
period.
Market Break Expected.
For the break, the commonly ac-
cepted cause was simply the extent Of
the previous rise. The only surprise
the professional expressed was that
1t had not come sooner incidentally,
as usual, those prepared for it were
in the minority. While it lasted. the
decline was precipitate. Between
April and April 90 the Dow-Jones
industrial averages broke more than
18 points and between April 13 and
April % the railroad averages dropped
more than points.
Now coming to the third period, that
of recovery. the chief feature was the
drop IN volume. In March, when
prices were going up, there were II
sessions with a turnover of 100000
shares, some of them close to 5000. 900.
There were II days with volume run
ming over a million shares.
In April there were only six days
with trading of more than two mil
lion and Is days with volume between
one and two million shares. In May,
however, there was no two-million-
share day at all and only that ran
over one million. In June business
dropped of almost to the vanishing
point.
Control Reduced Volume.
These figures on volume, it must
be noted, do not have the significance
that they would have had in pre-
Governmental days. On April
margin requirements were lacked
up for customers borrowing Of bro
kers and, on May /, they we're raised
for brokers and others borrowing Of
the banks.
loss of business on the exchange was
due in large part to these restrictions.
Otherwise the interference would be
that the outlook was unfavorable, for
such a sharp decline in volume on
a recovery would indicate loss of con-
fidence and forecast a renewal of the
reaction.
While the margin innova tons had
good deal to do with both the break
and the loss of business on the ex-
change, there were other factors at
work. In early April the European
crisis was at its height. Relations
between Great Britain and Italy were
strained to the breaking point and
predictions of another World War
were heard on every side. This un-
doubtedly had an adverse effect on
prices.
Legislation Feared.
At that time, also, worry over the
political outlook at home began to
show itself and finally there was the
renewed threat of legislation at Wash
ington adverse to business. One other
influence that worked against the
market was a slight falling of in
business and an uncertain trend in
commodities.
The interesting thing about all this
Is that in a general way the London
market followed the same course. If
the price curve of typical British
stocks is plotted on the same chart
with that of the movement of Amer
ican equities, striking correspond
ence will be revealed. The advance
on the other side began a month later
than it did here.
British prices initiated their rise In
April, 1885, whereas our market turned
in March of that year. The top in
Great Britain was reached in late Feb
ruary, 1886. In this country the peak
was touched in April. The differences,
however, are relatively unimportant;
the correspondence Is the real feature.
The suggestion is, of course, that in
both markets world conditions, rather
than national developments, were the
fundamental influences.
Franc Unsettled Market.
One particular foreign situation was
the cause Of perennial anxiety. The
periodic crises to which the French
franc was subject almost invariably
unsettled the New York market. The
connection was not perfectly logical
for, in the long run, franc devaluation
must be constructive. It was a theory
widely held, however, that readjust-
ment Of the gold parity of the franc
would mean an abrupt withdrawal Of
French capital from this country in
volving liquidation of American secur- |
tiles bought for French account. With
unfailing regularity this spectre was |
raised.