Run that by me again. Were there "a variety of catalysts" for yesterday's 900-point market move, or was there "no single catalyst"? Was it lower interest rates overseas or lower interest rates at home?That depends on where you go for your news. Reports from major news organizations about why the market went up sharply yesterday were endlessly contradictory. First, from The Wall Street Journal: "There were a variety of catalysts for the day's action, including news that lending markets are slowly unfreezing, a report that the government may be preparing to lend $5 billion to General Motors and hopes that the Federal Reserve will announce another interest-rate cut Wednesday. The Fed could push its target short-term lending rate down to 1%, which would equal the 40-year low in 2003." Set that alongside The New York Times, which went with the more generally mystical coming-around-to-buying angle: "There was no single catalyst for the surge, and market specialists said investors seemed to be coming around to the idea that stocks were worth buying, given that the Dow had plunged 32 percent since the end of August." The New York Post, for its part, sided more with its News Corp. ( NWS) colleague, the WSJ. The Post said that the rally was driven by "a technical 'perfect storm' of factors converging at the depths of October's wretched slump to reverse the worst month on record for stocks." But instead of leading with General Motors ( GM) and the Fed, the Post went with the yen and computer trading models. It also, it bears mentioning, saw significance in Halloween, placing the calendar in the lead: "Traders launched a global rally yesterday to help lift flattened portfolios off the ground and ignite investor spirits again -- just in time for Wall Street's hallowed October effect."
No Halloween over at the "Financial Times". The major reason there was the yen carry trade. Here is its headline: "Stocks rally on talk of Tokyo rate cut." And its lead: "US stocks staged a fierce late rally on Tuesday after speculation that Japan could cut interest rates helped fuel a sharp reversal in the yen, easing concern about a sudden unwinding of the ¬so-called yen carry trade." To MarketWatch, the issue (with apologies to the FT and the Tokyo rate cut) of an anticipated U.S. rate cut was so central, it went in the article summary: "Stocks stage dramatic comeback as the Fed begins the first day of a two-day meeting in which rate cuts are seen as a near certainty." But the article opened with use of the catch-all "bargain hunters" as cause for the rise, with the issue of U.S. interest rates not appearing until down low in the article: "U.S. stocks blasted higher Tuesday afternoon, wiping away a week's worth of steep losses, as the Dow Jones Industrial Average jumped nearly 900 points -- its second biggest daily point gain ever - as bargain hunters flooded the market." And where will we go from here? Well, at least according to the Associated Press, nowhere good. Here is its headline: "Dow ends up almost 900, but no one is exhaling: Late-day rally drives Dow up almost 900, but investors don't think surge will be sustained" How many investors (note the affection of the plural) did they interview to get the right to make such a sweeping statement about the future? Uh, two investment strategist hacks, two economists (who actually agreed) and a carpenter from Deltona, Fla. Although, the carpenter doesn't technically comment on the market. He just talks about cutting back on Christmas gifts.
Does all the market commentary sound a bit flimsy and made-up-as-we-go-along? Bingo. What is most remarkable is that on a daily basis (as The Business Press Maven has pontificated before), we have whole narratives built around statistically insignificant movements in the stock market, motives written in honor of moves the size of rounding errors. Even with a 900-point move, we are still served up nonsense. But the reality of the situation does not run on such tidy story lines and easily digestible motives.