Stock Market
Last week was perhaps the most remarkable speculative week in modern history of the New York Stock Exchange. Speculative, because there were no political or geological events like the declaration of War in 1914, or the San Francisco earthquake of 1906. Modern, because in olden days (up to 1907), the trading was small in volume and almost entirely between professional speculators, consequently subject to more sudden and violent whims than the trading of today, which affects the fortune of perhaps 7,000,000 U. S. security owners.
Long will it be remembered in Wall Street that last week's unparalleled bull spurt came immediately after a dull bear market, precipitated by a sudden break (TIME, Feb. 27). Equally long will market historians discuss the reason for last week's phenomenal spurt. The principal reason was the unexpected action of the officers and directors of the General Motors Corporation in purchasing 200,000 shares of their own stock in the open market for their own account.
The result was not only a week of record volume--16,278,900 shares between Monday morning and Saturday noon--but a record week in the quality of the stocks that went up under the leadership of General Motors. Only the best stocks gained.
General Motors managers acted against the pessimism of the Federal Reserve Bank. Why? Because their annual report for 1927, published last week, was far and , away the most encouraging document which the financial year had so far brought forth. Assets of $1,098,477,577, an increase of $77,583,470 over 1926 earnings of $235,104,826, the largest peacetime result ever achieved by a corporation; total business of $1,269,519,673--these figures stimulated Wall Street speculators and investors everywhere, and they bought 2,431,500 shares of General Motors stock in five and one-half days, lifting the price of the stock from $144 3/4 to a high point of $161. There are 17,400,000 shares of General Motors stock outstanding. Last week they increased $282,750,000 in value.
Shortly after the General Motors spurt, the market's opening was one without parallel in the memory of the oldest ticker-tape scanner in the field district. It had been rumored that there was a corner-in Radio Corporation of America, that desperate shorts who sold 350,000 shares could not borrow any stocks with which to make delivery to the purchasers at 2:15 P.M. Every craning neck in customers' rooms, every visitor in the packed galleries of the Stock Exchange, knew that General Electric Co., Westinghouse Electric Co., National Bank of Pittsburgh and the famed Fisher Brothers of Detroit owned between them almost all of the 1,155,400 shares of Radio Corporation stock outstanding. Shorts had nevertheless risked selling one third of this total down to $85 1/4 a share. The night before it had closed at $121 1/4 The opening bidding and asking scene at the Radio Corporation post was a football scrimmage of hysterical, shrieking stock brokers. Radio Corporation finally opened at $120 1/2 A few minutes later it was at $138 1/2, which price it held until the close of the day. Blocks of 10,000 shares at a time came out on the ticker at ever increasing prices. The shorts were caught; were "paying through the nose." The Stock Exchange authorities, interviewed by agonized shorts after the close, declined to commit themselves as to whether an investigation would be ordered to see whether a corner existed. The day's total trading was 3,909,100 shares, the largest day in the 130 years of the history of the Stock Exchange Brokers, traders, speculators, gamblers rejoiced. The Ides of March, terror of Wall Street, had passed.
* A corner exists when no more stock is offered for sale against heavy bidding for an hour or more. The Stock Exchange authorities then suspend trading in the stock and settlement is arranged on a "reasonable" price basis fixed by the Stock Exchange governors, usually near the last price of sale. This is a modern humane contrivance. Formerly cornered shorts were forced to pay up to their limit of solvency.