October 23, 1929: Worry spreads throughout Wall Street as the New York Stock Exchange situation worsens

By a writer of The Christian Science Monitor

from the October 24, 1929 edition

Stock Decline Goes On: Heavy Losses Listed

Prices Break 15 to 30 Points in Selling Wave-

Banking Support Absent

In what is probably the worst demoralized New York stock market in recent years, apparently exceeding in intensity of liquidation the savage break of March 26, when prices tobogganed today in a precipitous decline which wiped out thousands of margin traders who had desperately clung on to their holdings in a vain hope of a rally which might salvage a shred of their principals.

The avalanche of selling which swamped the facilities of the exchange yesterday afternoon, and caused the ticker to run an hour and 45 minutes after the actual close of trading, had so impaired the position of accounts throughout the country that stocks were thrown on the market for what they would bring. This was indicated by the tremendous volume in the first half hour of trading, when sales were at the rate of 16,000,000 shares a day. Up to noon the volume of trading aggregated 5,700,000 shares, or the heaviest sales for any equivalent period on record.

Banking support which was expected to stem the decline following the drastic nature of yesterday’s break failed to make its appearance in any substantial way, through prices in a number of cases opened higher than the night before.

Buying Power Absent

However, it was apparent that real buying power, was absent, and the conclusion of the Street was that banking interests had declined to let the market take care of itself, allowing prices to seek a level where investment funds would be attracted.

Everywhere people are asking just what is the cause or causes of the sweeping reaction which reached a state of demoralization this week. Experts have been called on to their opinions. The consensus seems to be that the slump is largely an aftermath of the wild orgy of speculation which has been going on for at least two years. In fact, the bull market is regarded as having started five years ago.

One class of security after another, and particularly public utilities, have been pushed to what is now seen as unreasonable heights. No one asked what was the yield on a security; what was wanted was merely a prediction or a surmise as to how high it should go.

Security No Point

Common stocks became the sine qua non of the portfolio of the average small-town financier. Preferred stocks and bonds were allowed to lapse into innocuous desuetude. Investment trusts were formed by the hundreds to absorb the money of the bootblack, the grocer, clerk of professional man who did not have time to study values for himself and the gala day of the junior security was at hand.

Security was hardly a point at issue. Appreciation was the great desideratum. Talk over the dinner table of millions of citizens was not complete unless some reference to the stock market was included.

With the spread of the desire for “easy profits,” billions of dollars were poured into the security markets in New York, Chicago, Boston, Pittsburgh and the west coast. The ever mounting total of brokers’ loans told the story of stock being bought with borrowed money.

Just how far this speculative rage went is indicated by the $6,801,000,000 of brokers’ loans as of last week, which compares with $4,664,000,000 a year previous, a growth of two billions in one years.

The traders in the stock market have pursued a course as independent of actual facts as if securities were entitles divorced from industrial and business conditions. When a return of 3 to 4 per cent on a stock was regarded as too low for consideration a few years ago, stocks have been bought that yielded only 1 to 2 per cent. The mere fact that someone else probably stood ready to take the stock off buyers’ hands at higher prices was reason enough for the purchase.

This progress continued for such a long time that it was firmly believed that the old-time law action and reaction had been discarded and that we were in a new era where prices kept ever rising. The present crash, while giving the unwary a rude awakening, nevertheless indicates the return to investment sanity. What will be the return in the way of income is a question likely to become more prevalent from now on. The speculative public is likely to be in a chastened mood for some time to come.

NEW YORK (AP)–Wall Street experienced the darkest day in years today as a selling movement approaching panic proportions, completely demoralized the stock market and hundreds of millions of dollars in quoted values disappeared by the minute.

Such leading stocks as United States Steel tumbled $9 a share to $195, Standard of New Jersey $11 to $62.50, American Telephone $23, to $249 and Johns Manville $40 to $140.

A hasty meeting of leading bankers was convened at the offices of J. P. Morgon & Co. shortly after noon, including Charles E. Mitchell, chairman of the National City Bank, and A. H. Wiggin, chairman of the Chase National Bank.

The announcement of the meeting appeared for a moment to have checked to checked the decline, and a few issues rallied a little. United States Steel, after touching $195 a share, in contrast to the year’s high of $261.75, sold soon after 1 o’clock at $199.

A stock market panic appeared to have been checked early this afternoon, as leading bankers issued reassurances, and prices of many leading stocks, after declining $10 to $40 a share, rebounded sharply.