Market & Trade

For a change last week the stockmarket went up. It was no whooping rally; the Dow-Jones industrial averages showed a net gain of less than 3 points for the week. Daily trading on the New York Stock Exchange never reached 1,000,000 shares.* Yet Wall Street had what Owen D. Young calls a "feeling in the seat of the pants" that the market had turned a corner. From a recovery high early in March to their low in June the Dow-Jones industrials dropped approximately 15%, from 194.4 to 165.5. By last week they were back to 172.2. Mercurial shifts in Wall Street sentiment can never be adequately explained but the chief contributing factors last week seemed to be the lifting in some measure of the triple threat of strikes (see p. 77), war and perennial troubles in France (see p. 21).

While war talk is a stockmarket depressive it is always a shot in the arm for the grain market. As the bumper U. S. wheat harvest rolled north last week, the red cereal soared to a high of $1.26 1/2 per bu. on the Chicago Board of Trade, registered a net gain of 10-c- for the week. Even more important than war talk was the disastrous failure of the wheat crop in Canada, where drought & rust in the past few weeks have cut 150,000,000 bu. off early estimates of the Dominion's harvest.

With a billion-dollar wheat crop in prospect in the U. S., the Department of Agriculture predicted last week that total farm income this year would top $10,000,000,000 for the first time since 1929. Industrially the picture was still more pleasing. Second-quarter earnings reports would be closely scanned for signs of shrinking profit margins but actual profits were expected to compare favorably with a year ago. Operations in the steel industry were above a year ago although strikes cut the rate from above 90% capacity in May to around 75% currently. The price of steel scrap, a good barometer of steel opinion, advanced in Pittsburgh last week for the first time since April. Summed up Manhattan's National City Bank at the end of the fiscal year (see p. 14).

"It is a frequent observation . . . that business sentiment is not as good as the business facts, especially in quarters influenced by the declines in the security markets. . . . The month of June completed a very satisfactory half-year in business, during which industrial production, employment and payrolls, the volume of trade, and business earnings were all higher than in any like period since the beginning of the depression. [In brief, farmers and other producers of raw materials have been getting good prices for their production, labor has had more work at high wages. Manufacturers of goods of everyday use have enjoyed a phenomenal activity, exceeding the 1929 peak.]

"This improvement is all on record. It does not represent an abnormal expansion of business, when measured against the needs to be filled and the capacity available to fill them, or when compared wit the past; and if the industries are allowed to operate with efficiency, keep their cost down, and price their goods at levels that will keep trade going, there will be little concern as to business in the second half year."

*Recommended last week by a special Stock Exchange Committee headed by E. A. Pierce & Co.'s Edward Allen Pierce, were sweeping changes in Stock Exchange commission rates, the net effect of which would be to increase members' revenues. Instead of the present scale, based on the number of shares, Broker Pierce would substitute percentage commissions based on the value of the transaction.

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