Week in review:
“Pronounced pessimism saturated speculative sentiment”; all three major market divisions (industrials, rails, and utilities) broke to new bear market lows as measured by the Dow averages. “No visible change took place in the underlying economic situation. Evidently the abandonment of hopes for any business improvement before autumn influenced a stream of belated selling” that then fed upon itself and gained momentum. In connection with the stock decline, there were persistent rumors “of financial troubles abroad. While nervousness over the Viennese banking situation undoubtedly added to the unsettlement in the domestic security markets, it is doubtful if foreign selling at this center surpassed ordinary proportions.”
German marks fell to a new yearly low due to movement of capital out of Germany, particularly to Switzerland. “However, Berlin advices stated that the volume of capital shipments had not been alarming, and that no gold exports are looked for if any improvement is shown in the Austrian banking situation.”
The money market showed no significant changes as the Fed. Reserve paused in its campaign to cut short-term rates.
Bond prices were mostly reactionary during the week; the domestic corporate list suffered acute weakness at times with record lows in many issues and groups. US govts. were slightly lower early in the week but firmed up close to record highs after successful Treasury bill auction Thursday; market is awaiting word on new long-term financing. Municipal bond trading was quieter and some prices declined. Among corp. issues public utilities, highest-grade “legal” rails and NY tractions [mass transit cos.] were relatively strong while lower-grade rails, industrials and oils were weak. The foreign list suffered some sharp fluctations; S American issues fell sharply through the week before rallying in the final session; German issues fell sharply on Austrian banking crisis and rumors of revision in reparations, though bankers said any revision wouldn't affect interest on loans owned by investors.
Steel production “seasonal decline ... resumed a more normal pace following a week or two of slowing down”; automotive demand tapered off somewhat but construction held its own. US Steel pres. Farrell's “electrifying remarks” of last week criticizing price cutting and urging maintenance of wages drew industry support.
Wheat and corn moved down to new season lows at start of the week, and then hovered slightly higher in spite of news of serious drought and dust storms in the Canadian Northwest, and general lack of moisture in the US wheat belt. Cotton continued last week's downtrend, hitting new post-1915 lows; weather turned favorable; private forecasts indicated cuts in acreage of 9%-11% for the upcoming season; NY Cotton Exchange estimated world consumption of US cotton at 11.1M-11.3M bales this season vs. 13.0M in 1929-30.
Some conservatively optimistic statements against the current defeatist attitude were made by financial and industrial leaders including C. Dawes, ambassador to England, Col. L. Ayres of the Cleveland Trust Co., and T. Lamont of J.P. Morgan.