Rally (Cont'd)

The great pot of the New York Stock Exchange continued to boil hotly most of last week, but in the last two days the fire of bullish enthusiasm cooled, stock prices lost more than one-fourth of their month-long rise (TIME, Aug. 8 et seq.). Speculators for the advance, amazed at their swift-gotten gains, suddenly rushed to cash in. At the rally's peak railroad shares stood 127% above their bear market lows, utilities 83%, industrials 74%. Stocks as a whole had climbed up the opposite side of the valley to a point abreast their prices last April. Market observers, who had been wagging warning fingers at the almost perpendicular ascent of the last fortnight, smiled knowingly. Having predicted a sharp technical reaction, they were not surprised that it was all the sharper for being so long delayed. Among the first to start the harvest were shrewd foreign buyers who were reported to have entered the market at its very trough. Volume of trading swelled to 23.595,000 shares for the week, largest in more than two years. Entering this week both stock & commodity markets steadied with trading at a reduced pace. In the last days of the wild uprush rumors of pools flew thick & fast. Farm equipment shares were bulled vigorously on the reports (all denied) that Russia was about to float a bond issue in the U. S., would presumably use the fund to purchase farm machinery. From the June low of $16.75, J. I. Case shares (plows, harvesters) were whirled up to $62.50. In the two-day reaction they slumped to $46. If the Russian bond story was pool-inspired, pool managers must have been amazed to see the old Russian Imperial issue, which has long slumbered on the Curb at less than 1-c- on the dollar, suddenly aroused and run up to 3-c- on the dollar. More gratifying to oldsters than the roaring stockmarket was the strength of the bondmarket. Oldsters feel that there can be no sustained business improvement until wily investors and conservative institutions are again prowling daily about Wall Street sniffing for choice bond bargains. Though bonds, too, lost ground at the end of the week, the Dow-Jones averages showed a net gain of 20% from their Depression low. Outstanding performer in the commodity markets was cotton. Wheat broke badly with the stockmarket, December contracts slipping off 5-c- from their high of 60 1/8-c-. Chicago feared that a British preferential tariff for Canadian wheat might be hatched at the Ottawa Conference. But still excited by the Government estimate of a 6,000,000-bale decrease in this year's crop, cotton buyers drove up the price above 8-c- a pound for the first time this year. Last June near contracts sagged below 5-c-. The South estimated that $200,000,000 had been added to its income.* New Orleans cotton brokers were swamped with orders. Though cotton fell off with stocks and wheat, the loss was trifling. Governor Meyer of the Federal Reserve was still pushing plans last week for purchase of the Government's holdings by a textile mill syndicate, but no details were announced. Still hopefully scanning the dull business sea last week were distressed operating executives. The only sails they spied were further rises in commodities. The Analyst's price index climbed 1.4 to the high since January of 93.9. The New York Times's weekly business index drooped to a new low. Carloadings, steel activity, automobile production, electric output, all registered contractions for the week. But statisticians, noting the small increase of $14,000,000 in loans to brokers during the stock bulge, put their sharp pencils to paper and figured that the U. S. public in the last month had put $90.000,000 in cash into stocks of U. S. corporations.

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