Evening star., 1940-01-20
Stock Decline Held
insufficient Sign
OF Trade Outlook
Businessmen Advised
To Wait for More
Certoin Evidence

NEW YORK, Jan. 20.-The turn
down in the stock market this week
and last was more dramatic than
severe, says Business Week today.
Stocks had been backing and filing
In such nice orderly way since
the beginning Of November that the
market was just being taken for
granted. Business was pretty much
in the same state-just poking along.
This week business continued to
poke Business Weeks index was
down nine-tenths of q point-but
the level Of activity was still well
within reach of the December highs.
However, when the stock market
proceeded to fall out Of its trading
range, the decline was construed as
q tell-tale of future business events.
There were, to be sure, factors
apart from business which were in
strumental in putting the stocks
down. There was report that
Great Britain, at last, was ready
to take over the securities Of its
nationals and sell them in this mar
ket. Denial Of the report did not
erase the effect. Shares here reced-
ed under fairly substantial iquida-
ton. At the same time, chart
readers interpreted the break
through on the downside as pro-
phetic not only for stocks, but for
business. And bear operations were
added to the selling.
Termed Inconclusive.
The action of the market in itself
is hardly to be regarded as a con-
elusive sign that q break in busi-
ness is ahead. And certainly, If
the market is forecasting a decline,
1t hardly is forecasting the unex-
pected. For months Business Week
has been suggesting that q drop
in industrial operations is q logical
first-quarter expectation. So the
market-late rather than early
may simply be discounting this. In
view OF the circumstances it is wise
for the businessman not to invest
the market decline with a long
term prophetic probity. It is wise
to wait and see what business later
does over the next few weeks.
There is always the possibility that
the stock market may be looking
much farther ahead than the first
quarter-may be anticipating fresh
political and foreign unsettlement
in the second quarter. But it still
seems bit early-when business
itself has not shown any real signs
Of dropping-to expect any out-and-
out depression during the first half
Of the year. 1t takes time for de-
pressions to get rolling.
In the meantime. it is noted by
economists and statisticians that in
dustrial activity in December was
around 125 in major business in
dexes, and that, even If business
continued at exactly the same pace
If volume did not drop-the indexes
would show decline in January.
Indexes Mistrusted.
The reason Is that many indexes
have a seasonal adjustment which
requires an increase Of about S pei
cent in industrial production in Jar-
uary If the index Is to remain un-
changed. Thus. if business volume
did not vary one jot from December
to January, the Federal Reserve
Board index would register a decline
So the word has gone around thai
you cannot trust indexes at this
time; that, because of minor differ.
ences. they will give a false bias or
the downside in January. While II
does no harm to bear this in mind
1t should be carefully noted thai
steel operations already are down II
points from the high of 80, and thai
other indicators have begun taperine
off-not after seasonal adjustments
but on an absolute basis.
Furthermore, while the Fedora
Reserve index calls for a seasonal
advance in business during the
month Of January, Business Weeks
Index actually calls for decline
In other words, If business actually
is unchanged from December to Jan.
uary, Business Weeks Index will ad.
vance a little So persons anxious
not to be beguiled by the seasonal
in the Reserve Boards index woulc
do well to watch the performance
of Business Weeks Index. II it goe.
down, then business has gone down.
and no foolinp.