The market went up today because…

The S&P 500 went up nearly 3% today, and the Dow crossed the 8,000 mark for the first time since February. Most every news outlet is attributing the rise to a change in mark-to-market accounting rules that lessen the burden of write-downs on banks. why-did-the-market-move

While I’m sure the change of the accounting rule might have helped, does anyone really know why the market moved up 3%? Shares of Time Warner, the company that owns the magazine I work for, rose FIVE percent today. That’s versus less than 0.25% for JP Morgan Chase, about 2.7% for Bank of America, and about 4% for Goldman Sachs. Does anyone think that a change in the accounting rules helped Time Warner more than it helped those companies? In fact, if the market’s huge move was due to that accounting rules change, why did some banks’ gains fall under the S&P’s gains?

The point here isn’t to rag on overworked reporters. It’s more to rag on the idea of being able to attribute a stock market move to any one event. Ok, sometimes an uber-event like the bankruptcy of Lehman Bros. is the clear driver of the market’s direction. But most days, trying to find a reason for a daily move is silly. In an interview with the Nieman Journalism Lab, NPR correspondent Adam Davidson says that business journalism needs to lose what he calls the authoritative voice of God:

So, the voice — I feel like the voice of business journalism is sort of, it’s an authoritative voice of God. “Today, the stock market rose 3.8% on news of unemployment rising and anticipation of the Fed cutting its interest rates.” And, you know, I know before I was a business journalist, as a consumer, I didn’t know much about business, and there’s a guy in a suit, who seems like he knows what he’s talking about, and he’s saying things with a very strong, authoritative voice, and what this crisis taught us is all those people were missing the most fundamental things…I mean, I think it’s a more trustworthy journalism if the journalist reveals their process of discovery. I don’t think it weakens our authority. I think it strengthens our authority ’cause it’s closer to the actual truth…They know we don’t, we’re not experts in that sense, and frankly, the expert we quote isn’t an expert in that sense — that he’s definitely right, or he can speak with objective truth about things.

But don’t worry, reporters (myself included) will continue to try to pin easy-to-digest motives for every one or two percentage point increase in the market. If we don’t have anything, we’ll resort to my personal favorite catch-all: “profit taking”.

– Joe Light


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