Chemical & Engineering
NEWS AUGUST 29, 1966
The Chemical World This Week Chemicals mirror stock slide That the stock market is dropping is woefully apparent these days to Wall Street's ticker tape watchers. New lows are continually being reached as money becomes tighter than a frozen stopcock. Chemical, drug, and petroleum stocks included in C&EN's stock price indexes have followed the sinking market (see table). The "big seven" chemical companies reached their high—277.2—during the first week of January. By Aug. 19 this index had dropped 2 3 % to 213.3. The "21 other" chemical companies for which C&EN compiles an index have shown a similar drop. From a high of 412.6, reached the second week in January, this group had dropped to 352.2 by Aug. 19, a 2 1 % decline. The decline of chemical stocks has followed the slide of the market in general as shown by Standard & Poor's index. This index reached its high for the year during the third week in January. From that point on it has slipped and skidded 14 % to a low for the year on Aug. 19. The stock market is declining while chemical companies are turning in record earnings and carrying on an unprecedented rate of business activity. Why then should chemical stock prices drop? The chemical industry (like any industry) is affected by monetary and political actions. And recent actions have done much to confuse the investor about the economy. The war in Vietnam, credit policies, and labor troubles and shortages, for
example, have sketched a confused picture for the investor. And while business activity is unprecedented, many danger signs have popped up in the economy. For instance, housing starts are down and auto production is off. The confused and wary investor thus hesitates to commit funds to stock purchases. Also, fixed-income investments are attracting money that could be going into the stock market. Opinions of Wall Street's experts don't do much to clear up the confusion. A few optimists think a buying rally is just around the corner. Others feel that the bottom has not been reached and advise caution. The drug industry is one that still holds some interest on Wall Street. Shearson, Hammill & Co., a Wall Street brokerage house, says the drug industry is less likely to be affected by the current problems of the economy. The firm goes on to say that drug companies usually fulfill all their financial needs internally and are far less vulnerable to money market conditions than are other firms. Be that as it may, drug stocks have not been immune to the general market slump. From a high of 6S1.6 in January, C&EN's drug stock index slipped to a low of 578 on Aug. 5. Petroleum stocks also continue in favor with some of Wall Street's experts. Fahnestock & Co., another Wall Street broker, takes the position that, almost without exception, the major domestic and international oil stocks are attractive purchases at this time for long-term appreciation. Petroleum stocks, judging by C&EN's index of oil
stocks, are down 14% (to 397.8) from early this year. Fahnestock thinks the bottom may be near; with expectations of good earnings next year, petroleum stocks look like good buys. Oddly enough, one group, the rubber industry, is bucking the downward trend. Rubber stocks went into a general decline about May 1965. Late in the year they began to nose upward, and from May of this year have shown a strong upward trend. Rubber stocks reached their low of 402.2 in May. Since then they have risen about 20%, probably because of record earnings in the first half of the year, strong demand for rubber products, and a strong tire replacement market.
TGS cleared of SEC charges Four of Texas Gulf Sulphur's top men have been cleared of Securities and Exchange Commission charges that they used for their own advantage "material inside information" about the company's ore find in Timmins, Ont. Federal Judge Dudley B. Bonsai in U.S. District Court in New York City dismissed the charges against TGS president Claude O. Stephens, executive vice president Charles F. Fogarty, directors Thomas S. Lamont and Francis G. Coates, and six others. The judge also cleared the company of SEC's charge that it had issued a false and misleading press release about the ore discovery. Two defendants, TGS engineer Richard H. Clayton and TGS secretary David M. Crawford, were found
C & E N ' s c h e m i c a l , d r u g , a n d oil s t o c k indexes d r o p ; r u b b e r stocks b u c k t r e n d 1966l 277.2 412.6 681.6 462.5 486.9 398.7
High
Low
High
Big 7 2 1 Others Drugs Petroleum Rubber Standard & Poor's
1965
(Jan. 7) (Jan. 14) (Jan. 28) (Jan. 28) (Aug. 5) (Jan. 21)
213.3 325.2 578.0 397.8 402.2 340.8
(Aug. 19) (Aug. 19) (Aug. 5) (Aug. 19) (March 18) (Aug. 19)
289.9 415.5 669.5 462.9 466.8 393.4
Low
(May (Dec. (Dec. (Nov. (May (Dec.
14) 17) 23) 12) 14) 31)
257.1 349.2 537.0 405.5 398.9 351.7
(July 23) (June 25) (June 25) (Jan. 1) (Jan. 1) (June 25)
"Stock indexes calculated on closing stock prices for Friday of each week, January through Aug. 19
AUG.
29, 1966 C & E N
31
