Evening star., 1949-08-07
Stock Market Closes
Weak With Summer
Rally al Full Speed
BY William D. Horeon
A,soeiotsd Press Financial Writer

NEW YORK, Aug. eff the
stock market knows what it's talk
ing about, business this fall will
be good.
The market rounded out the
week with it's summer rally going
ahead at full speed. Buyers bid
for stocks aggressively and almost
continually had to pay higher
prices to get what they wanted.
At the close Friday, the general
price level had reached a four
month high. Measured by the AS
sociated Press average of so stocks,
the market was within hailing dis
tance of the 1949 peak.
Whether the markets action
had anything to do with the Ma
tions business life was another
question.
Some experts claim that the
market still fulfills it's traditional
function as an economic barom-
eter. Other experts feel strongly
that what the market does, and
what business, commerce and in
dustry do. are in two separate
compartments.
Many See Improvement.
Today, though, the market
seems to be mirroring a widely
held belief in the financial dis
trict that the recession of the past
eight or nine months or so has
just about touched bottom-for
the time being anyway.
Last May the market went into
q nosedive that reached a climax
when a 4E2-year low was hit a
month later. Talk then was to the
effect that the recession, which
apparently was just coming to the
markets attention. showed signs
OF getting out of hand.
Wait until you see second
quarter earnings reports brokers
gloomily warned each other
wait until a fourth round OF
wage increases shrinks profits -
The markets mood changed
overnight. Since mid-June the
price level has been ascending
The movement has been jerky at
times and frequent pauses were
taken. The direction, though, was
unmistakable
June quarter earnings state
ments were, for the most part,
reassuring. Some companies re-
ported record high profits. Wage
negotiations still troubled many
traders but that was problem
still to be faced.
Raw Materials.
Prices of number of impor-
tant industrial raw materials ad-
vanced and signs multiplied that
purchasing agents were taking
the rubber bands off their wal
lets. Companies which had laid
off workers called back part or
all of the people on forced vaca-
ton.
From 1ong-range viewpoint
probably the most heartening fac
tor was the attitude taken by
the Federal government. The Ad-
ministration recognized that all
was not beer and skittles in the
economy. Prompt and effective
action was promised, and in some
cases taken. Federal Reserve
Board moves to provide industry
with all the money it could use,
at a cheap rate. was regarded
rs a notable example.
On Friday, after a hesitant
start, buyers girded their loins
and went to work. At the clos
ing bell prices were up fractions
to three points and the market
had scored one of the largest
advances Of the year.
Short Covering.
An important factor in the
Friday jump-and one which
could be of considerable impor-
tance next Week-waS short COW
ering.
A short covering purchase is the
final half of a short sale. A spec
u]ator, for instance. decides that
ABC stock will go down. He goes
out and borrows 100 shares (for
which he pays small fee) and
sells the shares. His short sale
must be covered. sooner or later,
because he must repay the bor-
rowed stocks. If he can buy the
stock at lower price, he makes
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