To all things must come an end. Last week there came an end to the almost uninterrupted panic of selling that has fermented U. S. stock markets since Oct. 23. At the beginning of the week the path seemed as clear for further selling as in the summer it had for continued buying. The only thing that stood in the way was reason: long had speculators seemed to ignore reason. For the first three days, Panic held sway. Led by U. S. Steel, stocks dropped to new lows. Again there were tales of a "banking consortium" holding secret midnight meetings, tales of the "great bear pool."
Bullish corporate developments late in the week were many. An extra dividend of 30¢ was declared by General Motors Corp. Radio Corp. of America, long the prime scoffing object of "inflation" criers, showed earnings of $8,729,389 for the third quarter, compared to $1,409,299 in the preceding quarter. Announcement was made that the $250,000,000 patent suit brought by Bethlehem Steel Corp. against United States Steel Corp. had been settled out of court. The Aviation Corp. announced it had used part of its $20,000,000 cash surplus to buy stocks other than aeronautical securities.
Public confidence was helped when the Stock Exchange requested its members to report details on all sales and short stock, a privilege not used since the War. Although there is of course no legal wrong in selling short, few big operators would care to be exposed as "raiding the market," especially in a period when a decline might carry along U. S. prosperity. And if the "bear pool" were found to be an actuality, disclosure of its identity would enable powerful bulls to determine exactly how much pressure would be needed to destroy it.
With bullish feeling prevalent, selling of stocks slackened, ended abruptly as the significance of Constructive Factors became apparent. Helping to transform selling into buying was a further reduction ($710,000,000) in brokers' loans, reduction of the rediscount rate to 4½% announcement of a proposed $160,000,000 tax reduction.
After the tension of selling had ended, after Panic had taken at least a temporary departure, the chaotic jumble of happenings during the break became gradually clarified. It was possible to begin to summarize, thus:
Heroes. Julius Rosenwald, board chairman of Sears, Roebuck, early in the decline offered to cover the margin accounts of all his employes, became the prime hero. Later Standard Oil of New York became hero-ized with its announcement that it would lend $43 a share ($11 above the market at one point) to employes who had borrowed on their holdings. Other helping companies were Standard Oil of New Jersey, Humble Oil, Gulf Oil, U. S. Steel, Newton Steel. Late last week, when Washington's official silence was broken with promise of the tax reduction, then of an industrial conference, Hoover joined the ranks of heroes. No mere bullish oratory, this statement meant Prosperity was expected to remain, meant bigger corporate earnings and dividends, more spending and employing by the rich.