Gyrations

The first week of World War II hit U. S. stock and bond markets like a whirlwind. Many a man was still alive who remembered that Bethlehem Steel flew from a low of 25 in 1914 to a 1915 high of 600, General Motors from 58 7/8 to 558. Last week's main gyrations:

Government Bonds in recent years have taken the place of commercial loans as the bread and butter of banks. Day before Hitler jumped Poland, U. S. Treasury 4 1/4s (1947-52) stood at the fantastic price of 119 20/32, Treasury 2 3/4s (1956-59) at 106, etc. Since the premiums commanded by these bonds have to be amortized out of interest the actual yield (to maturity) of these two issues was 2.49%, and 2.37%.

Before war came, Federal Reserve officers had convinced most big city bankers that they would ruin their banks by liquidating their Governments, which would really break the market. A good many other holders felt otherwise, decided to free their funds for more profitable war boom uses. By the end of the week, an estimated $350,000,000 of Federal Reserve money had been poured in to support the market and the average price for all Treasury bonds was over 5 points below their 1939 highs (an immense loss for Governments, which usually rise or fall by 32nds). But the market did level off and the Federal Reserve stepped out.

High Grade Rail bonds were sold mostly by private investors. In the two days before Britain and France declared war (before stocks really boomed), the Dow-Jones average for high-grades fell off 1.81 points. Afterwards they lost little or nothing. Much the same was the performance of high-grade industrial and utility bonds.

Second Grade Rail bonds (mostly in danger of default) found war a boon, for war traffic might hoist many a railroad back to solvency. Typical reactions: during the week, Southern Pacific's 4^3 of 1968 went from 40^ to 48^, the 4^5 of 2013 of the New York Central from" 44! to 55^; the Dow-Jones average from 45.14 to 50.64.

Cat & Dog rail bonds, going at $2 and up, are unlikely to become worth 100 cents on the dollar with the best of war booms. But on the gamble that they would be worth something or that the Government might take over and pay 30-40-c- on the dollar, speculators dived in. The Dow-Jones average of rail bonds climbed 32.5%, the New Haven's defaulted 4 1/2s of 1967 from 12 to 15 7/8 (32.3%), Chicago, Milwaukee, St. Paul & Pacific's 55 of 1975 from 6 to 8 (33 1/2%), etc.

Stocks flittered like feathers in the whirlwind. Sugar, metals, oils, chemicals, aircrafts caught the swiftest of the upward currents. In the vortex, some food stocks rose, some fell. Few behaved so wildly as Guantanamo Sugar, long unnoticed at 7/8, up to 6 (600%) on Tuesday, backdown to 3 1/2 at week's end. Among Dow-Jones' 30 industrials could be found samples of virtually every form of windblown behavior:

Consumer Goods Stocks: Sears, Roebuck climbed 3%, steady-yield A. T. & T. 4%. Woolworth, with its big British and German subsidiaries likely to be war-slugged dropped 8%. Eastman Kodak dropped 7% apparently because investors connected Kodaks with beach parties, forgot Eastman's chemical and plastics business, forgot that armies use cameras.

Chemicals--Allied, du Pont and Union Carbide--rose 10-14%. Oils rose further and Texas Corp. led oils, up 23%.

Durable Consumer Industries all found the updraft. International Harvester was out in front, up 21% on the bet that some of farmers' rising income would be spent on farm machinery.

Heavy Industries carried the biggest label: "War Babies." Bethlehem Steel, prize baby of World War II, was up 30%, Big Steel up 31%. The 8-11% rise of Westinghouse and General Electric was credited to their varied electrical wares--from light bulbs to battleship machinery.

At the end of the wildest week he had seen since he became President of the New York Stock Exchange in July 1938, steady, youthful William McChesney Martin Jr. went on the air, more to sound a warning to reckless speculators than to felicitate brokers on sudden prosperity. Said he: "The Exchange . . . requires that every company listing securities on this market provide essential information as to its operations, earnings and financial condition in order that this may be available for the investor. May I appeal to you earnestly to avail yourself of this factual material."

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