Full of Steam

Like a man walking on the ceiling, the stock market last week continued to delight and mystify onlookers. In nose-thumbing defiance of all the gloom over strikes (see NATIONAL AFFAIRS), the market blithely kept on rising, for the fourth week in a row. With a 4.1 point gain during the week, the Dow-Jones industrial average broke through the high mark (190.19) of a year ago, when Wall Street confidently expected a Republican victory, and reached 190.36.

But the market’s rise was not as gravity-defying as it looked. It was solidly shored up by 1) the whopping third-quarter profits of many a corporation, and 2) an increasing tendency to pass some of these profits along to stockholders in the form of bigger dividends. Chrysler, for example, which had turned in a third-quarter net of $45.4 million v. $24.1 million in the 1948 period, raised its $1.25 quarterly dividend to $1.50. The stock went up 2⅛ points in the next day’s trading, to a new 1949 high of 58½.

Cutbacks. With production at a peak, General Motors pushed third-quarter sales to $1,580,405,459, up 32%. Its quarterly profit of $198.7 million v. $120.3 million in the 1948 quarter was the biggest in corporation history. In expectation of an extra dividend, G.M. stock rose to a new 1949 high of 68. But General Motors’ President Charles E. Wilson and Chrysler’s President K. T. Keller both warned that the steel strike had hurt even if it should end this week.

Many another corporation was also worried over a cut in fourth-quarter earnings from the steel and coal strikes. Some had been hard hit already. Of 47 railroads reporting so far, only two (Nashville, Chattanooga & St. Louis, and the Bangor & Aroostook) showed a gain for the first nine months over 1948. Some were in the red (e.g., Pennsylvania’s September loss of $2.7 million put it in the red for the first nine months, v. a $20.4 million profit in 1948), and a bad third quarter put all the rest down anywhere from 15% to 75% for the nine months. Among the coal companies, earnings were also down.

Even before the strike, overall steel profits had begun to slip. Though U.S. Steel’s third-quarter profits were up 13% from a year ago and Bethlehem’s up 1.9%, Allegheny Ludlum was in the red, Republic and Inland’s nets were off 23%, Jones & Laughlin’s 44%, and ten other companies showed corresponding decreases. Nearly all the oil companies were down and many another industry showed a turndown when compared with 1948’s third quarter, an alltime record.

Nipped Heels. With old-fashioned competition now in full cry, the race was to the swift, but not necessarily to the biggest. Some giants were holding their own; e.g., Procter & Gamble. Under its hard-selling new president, Neil McElroy, who worked up through P. & G. advertising to the presidency last October, the company boosted its net from $13.2 million to $19.7 million (a gain of nearly 50% for the Sept. 30 quarter). International Business Machines’ Thomas J. Watson turned in a $24.7 million net for the nine months, up 16%, while most of his rivals felt declines. But many other giants were being nipped by faster-moving competitors.

General Electric Co.’s net of $21,060,037 was off about 28%. But second-place Westinghouse had turned in $20.5 million, a 109% gain that pushed it nearly abreast of its giant rival. Westinghouse’s President Gwilym Price gratefully added 40¢ to the usual 25¢ quarterly dividend and Westinghouse stock joined the big group* of those who boosted dividends and made new highs on the big board.

* Among them: Freeport Sulphur which, with profits up 42%, raised its dividend to $1.25; Texas Co., Budd Co., Standard Brands.