First FLASHes

Some laid it to talk of dollar devaluation. Others thought it was foreign buying inspired by better news from Spain. Still others credited it to the beginning of new pump-priming. A few thought shorts were spurred to hasty covering by the Stock Exchange decision to publish precise figures of short interest in each stock. Inventors of explanations had full scope for their talents. For last week something hit the Stock Exchange with an elevating power like that of a volcano erupting beneath it. In the entire previous week only 1,700,000 shares had been traded, smallest full week since 1921, and Wall Street was as gloomy as only that particularly volatile spot can be. Then one morning as customers' men straggled long-faced to their desks, telephones began to ring. . . .

With orders to buy 50, 100, 200, 500 shares of leading industrial stocks, trading in the first hour whopped up to 250,000 shares. Last fall in an optimistic moment, the Exchange devised a system of FLASH quotations for use whenever the ticker got five minutes behind. Last week it had a chance to use it for the first time. FLASH--X (U. S. Steel) 49 7/8. FLASH--A (Anaconda Copper) 28. FLASH--T (American Tel & Tel) 140 1/2. When the clay's closing bell bonged, brokers had enjoyed the first million-share day since May, Dow-Jones industrial averages were up a thumping five points to 118.6 (1938 low: 98.95; 1937 high: 194).

Next day the surge continued, with Allied Chemical leading the way with a $9 gain. On volume of 1,457,000 shares, the industrial averages went through the previous rally peak of 121 to 121.34. To Dow Theorists, of whom there are an immense number (TIME, June 20), this was enormously significant--if the rail averages confirmed the industrials by breaking through their previous high of 23.5, it meant a decisive change of trend. Two days later, rails, highballing after industrials, went to 24.9. To Robert Rhea, leading exponent of the Dew Theory, this was "more bullish than anything seen in the averages for more than two years." But Robert Rhea warned that though this meant that the secondary trend (wave) had changed from bear to bull, there was still no proof that the primary trend (tide) had done the same.

But U. S. investors were not overly disturbed by doubts. All week long trading and prices reached new peaks. At week's end 10,000,000 shares had been traded, values had increased $5,000,000,000 and the industrial averages stood at 131.94, rails at 25.45, utilities at 20.58. Leading stocks showed such gains as U. S. Steel from $43 to $54; U. S. Rubber from $27 to $32; American Tel & Tel from $129 to $142; Chrysler from $42 to $57; N. Y. Central from $11 to $15; Electric Power & Light from $9 to $1 i ; Johns-Manville from $71 to $84; General Motors from $30 to $36. Moody's Commodity Index rose from 136.7 to 140.8. All told, it was the biggest bull movement in any one week since that following the bank holiday in 1933.

Great question was: Did this resounding upturn of the markets mean that the turn had come in Depression II? Last week Secretary of Commerce Roper was not slow to declare that it had, that business would revive in the fall. Colonel Leonard P. Ayres speedily agreed. All over the U. S. lesser seers chimed in.

For although men have come to distrust the moods of the stockmarket, industry last week furnished a score of indications to back up the accuracy of the stockmarket barometer.

P: Steel production at 28.7% registered a small gain for the fourth week in succession. Simultaneously, steel prices were drastically cut, a move which everyone but the steelmasters considered thoroughly bullish. Best steel news of all was a $1.50 rise in the price of Pittsburgh scrap, lifting it to $12.50 a ton. Since 50% of new steel is melted scrap, a rise in scrap prices is generally the first sign of reviving demand for steel.

P: Carloadings rose .3%. And the first 18 railroad net operating income figures announced for May were off only 49% from a year before, against 62% in April.

P: Textiles, which have rivaled the railroads in their decline, enjoyed the biggest lush of buying since January 1937.

P: Power output was static at last fortnight's figure, but this was higher than a month ago, though still 10% under last year.

P: Frightfully depressed anthracite prices rose 25-c- a ton to $5.75 and $4.25.

P: Department store sales, off only 10% from a year ago, improved from the 13% to 19% lag they have shown since February.

P: Though the Department of Labor revealed a more than seasonal drop in factory employment in May, a survey by Mill & Factory of 33 leading industrial companies showed only four were contemplating further layoffs in July.

P: Rubber companies revealed that the low of inquiries from prospective purchasers has risen steadily since April.

On the debit side of the Recovery ledger last week were, however, three big items:

P: Automobile production was almost the same as fortnight ago--40,918 units against 121,032 year ago and most people agreed that the industry would be a long while coming back, could hardly expect to play its 1933 role of leading the nation out of depression.

P: Farmers still are facing the lowest prices since 1932. But bumper crops, however much they may reduce farm purchasing power, mean nice volume for railroads.

P: By maintaining a steady volume, often in excess of 1927, building in 1938 has been the most optimistic phenomenon on the business scene for months. Last week, however, according to The Engineering News-Record, though new engineering contracts were 15% over last fortnight, they were 71% under a year ago, lowering the cumulative total for the year below 1937 for the first time. Simultaneously, observers noted a threat to construction in a tendency for falling prices to steady.

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