Ticker Lightning

Last week's violent and sudden break in prices on the New York Stock Exchange, with unprecedented volume of transactions during the last hour of the trading week, brought to speculators' memories the time-honored adage: "When a big market breaks badly on good news it is a bear market; when a big market rises sharply on bad news it is a bull market."

Friday's nose-dive was nothing short of shocking to the most hardened ticker-tape readers. Saturday's pace of selling was equally alarming, especially from 11 o'clock until noon. The ticker stamped out "Good Night" at 12:35, despite use of the new abbreviated symbols which normally keep it within one minute of the execution of orders on the floor of the Exchange. In one hour 1,100,000 shares changed hands.

The items of good news to which the market reacted were:

1) Increased car loadings.

2) Best financial statements ever issued by the General Motors Corporation, the New York Central, the Pennsylvania Railroads.

3) Decrease in brokers' loans.

4) First dividend in fourteen years to New Haven Railroad stockholders.

5) Increased bookings of U. S. Steel Corporation orders with an operating ratio of 90% of capacity.

6) Indications of a general speeding up of automotive industry to catch spring trade.

Against these favorable influences were some unfavorable items:

1) Spotty trade.

2) Unsatisfactory corporate reports, generally.

3) Further cut in oil prices.

4) Increase of unemployment in large centres.

5) Uncertainties in many commercial directions.

Two classic explanations were offered for last week's break:

First: popular speculative Wall Street has got in the habit of judging the trade situation by the stock market rather than judging the stock market by the manifest trend of trade. Hence, confusion of cause and effect, resultant consciousness of error, hasty attempt at correction.

Second: deliberate initiation of liquidation by institutions and powerful individuals who can carry their stocks through a blow if they care to but who have decided after due reflection that the level of stock prices is out of line.

Neither explanation admits the possibility of the existence of an underlying weakness of any degree of gravity. Obstinate gamblers for the rise may have barked their shins. Or that undefined but still not mythical group of forces known as "the large interests," the "insiders" of popular legend may have put the brakes on inflation. The only disquieting symptom last week was the pace at the finish. It cannot be accurately described for want of clear financial terminology. If stockbrokers had a sort of Beaufort's scale,* such as mariners use to describe wind velocity, it might be said that the week passed from the strong wind of "weakness" through the gale of "heavy liquidation" to the storm of "drastic reaction." But at no moment was hurricane force recorded. Hurricane weather, in finance, is panic, of which state the ticker pulse gave not a suggestion.

* Series of numbers from 0 to 12 arranged by Admiral Sir Francis Beaufort in 1805 to indicate wind velocity from calm to hurricane, or from less than 2 miles per hour to more than 75 miles per hour.