Evening star., 1941-02-16
Spring Expected
To Bring Test
For Markets
Defeat Scare in U. S.
Securities, Staples
Is Anticipated
Special Dispatch to The Star.


NEW YORK, Feb. 15.-With the
season for Germany's military Of
fensive at hand. the stock market
has been rejecting the uncertainty
of critical days ahead which may de-
termine the ultimate outcome of the
war. according to Business Week S
analysis of the business outlook
today.
Bargain hunters have been hold
ing Off, the magazine states. They
have been waiting for the vaunted
German offensive-and an indica-
ton of its outcome.
Consistently. common stocks have
refused to rally on good earnings
reports or even on business pros
pects-in fact. they have been going
down. A dividend rate of better than
per cent is procurable from rep
resentative list of shares. and that
is something worth thinking about
twice at q time when corporate
bonds are selling to yield less than
per cent and money in the savings
bank is good for only per cent. But
common stocks cannot be consid-
cred good buys" when conceivably
they might be picked up at war
sale prices, 10 to Is per cent lower
few weeks later.
Reaction a PrOba bility.
If the Germans launch an attack,
it is pointed out, the initial drive
probably surprise attack-will
have some measure of success. And,
since people over here are predis-
posed toward a British victory, the
immediate reaction will be one of
encouragement and fear.
So. as Business Week pointed out
nearly two months ago, 1t is neces-
sary to be prepared for a defeat
scare" this spring; it is necessary to
include in business calculations the
possibility of temporary collapse in
American sentiment. during which
not only common stock prices will
drop, but also commodities and
bonds may take tumble. A break
in commodities, however, should be
utilized for shrewd buying, not
selling.
Such liQulda ton. if it comes. will
be scare selling essentially. rather
than carefully planned action" says
Business Week. For. in the long
run, the national defense program
not the war in Europe-is the para
mount factor in the American econ
omy. And defense will go on re-
gardless of what course the fighting
takes this spring. In fact, If the
British lose. acceleration in the
tempo Of production may be pushed
Thus, for the stock market and
commodity consumption a high level
OF industrial activity is assured; and
though some earnings diminution is
to be expected. due to higher costs
and taxes. dividend rates Of most
companies are not imDeriled BY
and large the course of business is
fairly we'll mapped out-barring the
completely unexpected. New orders
have been outstripping shipments,
and as result, substantial backlogS
have been built up.
Backlogs Still Rising.
During the moderate recession
of the first three months of 1910 Gt s
hard to remember there was a de-
cline year ago about this time)
shipments were running ahead Of
new orders: but they were losing
ground in the second quarter. And
in the second half. new orders gained
faster than shipments. and at very
latest reports backlogS were still on
the rise, with shipments behind the
volume of incoming business.
"The jump in shipments and new
orders cannot be regarded as an un-
mixed blessing In the process Of
speeding production, manufacturers
increased inventories by $1,000 000,-
900 last year-a considerable en-
largement. But with Business Week S
index advancing from 126 (Decem-
ber. 1897 to a current level of 144,
that increase is not too far out of line
with business activity.
In a sense, this inventory rise
can be regarded as the building up
If private industrial stockpile But
backlogs also represent inventory
commitments-forw buying for
protection. Thus any sharp blow to
confidence-or threat of discontin-
uance of defense-could easily result
in a swift setback to business.
For at a lower level of output,
businessmen could live off their in
ventories and commitments for
many months. The decline would
feed on itself. But that time is not
here yet. And if panickv liquidation
of commodities occurs simultaneous
ly with a German assault on Great
Britain-the time might be ripe for
enlarging stocks-o hand during
yat ,r,aolyrncco