The action of the market today confirmed the belief of many analyses that yesterday's drop was only a technical readjustment and was not a signal for the beginning of a reactionary phase. Business and trade news was mostly favourable: steel operations rose in many centers; scrap markets were strong; and construction awards were eight per cent. above a week ago and three per cent. higher than the corresponding period of last year. Unfavourable factors were: expectations of a seasonal letdown sometime in August; the spottiness of commodities; and, the continued decline of bank clearings.
By courtesy of Swan, Culbertson & Fritz After a substantial rise of from one to three points in early trading Monday, reflecting the accumulation of favourable business news over the week-end, New York stock prices reacted to widespread profit-taking but succeeded in retaining a portion of their gains. Though the demand for securities was freely supplied the following day, volume dried up on the decline, indicating that traders had cautiously withdrawn to the sidelines. The inability of the market on Wednesday to respond to encouraging overnight news, which included U. S. Steel's declaration of its regular preferred dividend, was a signal for active liquidation. Stocks were sold heavily throughout the session with the market vulnerable to adverse news. Volume gained momentum on the scale down, while tickers had difficulty at times in keeping pace with the heavy trading. At the close, stock prices had lost up. to three points, their severest decline for the current upward movement which began on June 20. The market made a good recovery Thursday with prices finishing around the day's highs. Though the rally was accompanied by reduced activity, observers were of the opinion that the previous day's weakness was only technical.
At the close of the period, commodity prices, as gauged by the Dow-Jones index, were at their lowest level in five weeks, the decline on Tuesday being the widest since January. Increased hedging, commission house and foreign liquidation met little scale down support in the cotton market, Hedge selling, lack of important mill and foreign buying brought wheat futures down to new five year lows Tuesday, after which movements were confined to a narrow range. Little change was recorded in corn prices due to steady export demand. Large speculative holdings of rubber unloaded Tuesday, when the International Rubber Regulations Committee announced a postponement of its action on the fourth quarter quota, only temporarily checked the upward course of the market. Foreign and commission house selling and the absence of important demand accounted for the decline in sugar futures.
That the base for a genuine economic recovery in the United States is broadening was apparent from numerous indications of business improvement The Federal Reserve Board announced that industrial activity registered a contra-seasonal increase in the first three weeks of July. The "New York Times" composite business index rose sharply to its highest level since mid-February. Steel scrap and domestic copper prices continued to move higher. Growing optimism over earnings prospects for the fourth quarter was evident in automobile circles, while July revenues for railroad were expected to be the best for the year. Operations at the various steel producing centers continued to improve though fears that production may be outstripping demand and the uncerteinties surrounding wages obscured the outlook.
The market in figures:
Thursday July 21 July 28 Change D.-J. Average for Industrials 141.92 14220 up 28 DI. Average for, 20 Rails 29.78 28.54 off 1.24 0-7. Average for 15 Utilities 2207 2058 off 119 DI. Average for 40 Bonds 90.21 9036 up.15 D.-J. 11 Commodity Index 49.76 4844 or Commodity prices: Thursday July 21 July 28 Chicago wheat Lu Winnipeg wheat Corn 29 Cotton Business:
Previous Latest N.Y. Times index rs 814 Steel operations Carigadings (carloads), 501000 602,000 of capacity) 364 4 Electric power production (k.w.hrs.) *2,090,000 *2,085.000 Average daily oil Automobile output Production (bbls.) 2,343,000
7000 omitted wu cern its) 42,0)
Stock Outlook: Increased volume developing on the downside, industrial and rail share averages moving in opposite directions, and the market's vulnerability to adverse news imply the probability that a normal corrective reaction may be near. The industrial average has advanced from 107.74 to 144.91 so that s. one-third retracement would bring it to the 130-135 level and a two-thirds decline, to 120-123. The duration of the current primary upswing cannot be predicted, but it is unlikely that following such strength in the past month the trend will be reversed after a first reaction of three or four days, Federal Reserve Returns New York, July 28.
The Board of Governors of the Federal Reserve System, in their report for the week ended July 27, respecting the entire body of reporting member banks of the system, reveal no change on bills bought compared with previous week, but show a decrease of $2,000,- 4 000 compared with the corresponding period of last year.
United States Securities—held showed no; change as compared with st week, but registered a decrease of $38,000,000 compared with the corresponding period of last year, while the Federal Reserve rati; gained 0.1 per cent. over the previous week and 2.8 per cent, over th corresponding period of last year.
Credit outstanding to the Federal Reserve decreased by, $2,000,000 compared with last week, but showed an advance of $23,000,000 compared with the same time last year. Monetary gold stocks wer? higher by $13,000,000 from the previous week and by $569,000,000 from the corresponding period of last year, Industrial advances by the Federal Reserve advanced by $94000 from the previous week, but showed a decrease of $5,288,000 compared with the same period of last year.
Bills bought during the period under review totalled—$1,000,000; U. S. Securities held $2,564,000,000, while the Federal Reserve Ratio was placed at 825 per cent.
Credit outstanding to the Federal Reserve amounted to $2,583,000,000; monetary gold stocks $13,002,000,006 and industrial advances $16,308,000, Reuter,
Text read from the printed page and cleaned; old type leaves the occasional error.