Tuesday, July 7, 2009

Instant Analysis

One result of our ability to get literally constant news updates from the Internet is that pundits feel the need to offer a reason for every little thing that happens in the markets. It used to be that the nightly newscast or the morning paper would assess the day's stock market news and offer a reason for why it happened: a favorable economic report, good news on consumer durables, that sort of thing.

Now we don't have time to wait for the end of the day. Now, as soon as the market moves, the financial media will have their rationales posted on the Internet. For instance, yesterday, the online version of the Wall Street Journal posted at 9:44 in the morning: "US Stocks Decline In Early Trading; Weighed By Oil Prices." The Associated Press followed by reporting: "The stock market is in retreat again as investors around the world grow pessimistic about the economic recovery. Following the lead of stock markets around the world, investors are taking their cues from the tumbling price of oil."

The Dow had dropped 52 points as trading opened, leading to those reports. But then what happened? Stocks rallied, and closed the day up 44 points.

Did oil prices suddenly rise, fueling the rally? Did investors decide they didn't care any more about oil prices? Or were there always more complex forces at work than simply the price of oil? My money is on that last one.

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