Rally

People who believe that pessimism has been the chief drag against business felt better last week. The mercury in the sensitive thermometer of sentiment went shooting up. Warmest of rays was a sensational rally in stock prices. What had started three weeks prior as a slow, creeping advance suddenly became a running, leaping market. In percentages, even the famed Moratorium Market with its 28.9% gain in 25 days was outdistanced. Railroad shares jumped a whopping 58%, utilities 38%, industrials 34%. The market as a whole fattened itself 37% in 22 days, putting on millions of dollars of weight, much goodwill. Brokers bellowed with joy at the windfall of a 2,.800,000-share day.

Observers were inclined to think the rally started through belated recognition of the following fundamentally bullish items: 1) the Lausanne agreement; 2) the cessation of gold withdrawals and foreign buying of U. S. securities; 3) the I. C. C. merger decision; 4) expansion of credit. Certain industries had special reasons to advance. The oils showed improved earnings (see col. 2). Higher commodity prices, if maintained, would help the food and mail order companies. Big loans to railroads would mean orders for the equipment companies. But for the most part the rally was predicated upon hopes. Big Hope No. i was that the Administration was somehow in back of the market, would let no harm befall it, would prod bear flanks unmercifully. Big Hope No. 2 was that there was "something in the air." To assist this second hope, the Press of the land last week got behind the market and shoved amain. Every isolated plant to recall a few workers, every company to show good earnings, every regular dividend declared was shot out over the wires as news of a revival bestirring itself, served to stimulate buying by the public (see p. 10).

Much of the improvement in sentiment was caused by a turnabout in important commodities. The Annalist index of prices for July rose to 92.2 from 88.6 in June, the sharpest gain for one month since this index was first compiled in 1925. All the ground lost since early February was made up. The gain was apparently touched off by hogs, although the rise in petroleum last April was an indication of what might happen. While hogs had re-actecLfrom their highs of late June (TIME, July 11), last week they made up much of the loss. After hogs, cattle began to go up; then hides soared, spurred by the stepping up of shoe production. Then wheat suddenly responded to hot, dry weather in Canada and the U. S. Northwest, to reports of shortages abroad, to the apparent decision of many farmers to hold their wheat for better prices. Last week September wheat (new contracts) sold at 50 _3/4-c- against the July 18 low of 46 _5/8-c-, theoretically putting $36,000,000 in the purses of U. S. farmers, making up its losses since July 8.

During the month sugar soared and. with it, cocoa. Metals turned firmer and rubber sold at the best levels since mid-May. Cotton moved in a narrow range but last week there began to be talk of low plant resistance to weevils because of a lack of fertilizer. Cement prices were upped last week for the first time in three years.

But behind all the parade of rising prices and fanfare of publicity, major realities remained as grey as ever. Steel operations, automobile production, car loadings, electric power output failed to fall in line.

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