Exposing the malarkey behind reporting on stock market changes

We've all heard or read a variation of this and we've generally accepted it: "The stock market was up 400 points today on news that the inflation rate slowed in February."

Or, "Stocks were down sharply today, due to concerns over tensions in the Middle East."

Or, "Stocks remained were mixed today on news that Apple expects fourth-quarter earnings to fall short of expectations."

That's the template for reporting on the stock market – one that has been in place at least since I was a kid, when virtually every radio or TV broadcast had a "business" segment that primarily reported on the stock market.

I call baloney.

The connection of news events and the stock market is something that we accept because we've all heard it for decades. We're like people in the Middle Ages who were sure the sun rotated around the Earth because they'd heard it for decades. Or Raiders fans who believe their team is special because they've heard themselves say it for decades.

A caveat: Sometimes, news events do drive the performance of the stock market. When there's dramatic financial news (a country declares bankruptcy, Microsoft or Apple announces a brilliant success or miserable failure, a catastrophic news event happens), it affects the stock market.

But the rest of the time, here's what I suspect happens: Business reporters look at the stock market and then find a news item that could have some sort of financial angle. And connect them.

Stocks are up on the news of . . . uh . . . a trade agreement between Panama and Canada! Or maybe a tech company's earnings are better than expected. Or maybe the number of jobs created last month were up.

Stocks are down on news of . . . uh  . . . an oil spill in Saudi Arabia! Or persistent rumors that the Fed may raise interest rates. Or reports that a big company will have a disappointing report.

I spent several years choosing stories to appear on the Daily Republic business pages. I always suspected the reporting on the stock market was bunk, but I also always picked stock market stories because they're the scoreboard of the financial world.

Over the past decade, we've become more sophisticated in how we view the stock market. We realize that an increase in stock prices doesn't mean that thing are better for all of us. We realize that stock prices going down doesn't mean imminent catastrophe for all of us.

The stock market is not directly connected to us, any more than an increase in the stock market is connected to the news of the day.

Really, it's absurd when you think about parallels. What if someone wrote, "The new Batman movie had a huge weekend box office after news broke Friday that Samsung's new Galaxy phone exceeded sales expectations."

Or if you read, "The Warriors won their third straight game last night on news that Russia was sending more troops to the Ukrainian border."

How about if someone reported, "The number of COVID infections dropped today on news that Britney Spears' conservatorship would end."

We'd laugh at that. Or . . . maybe we'd adopt that as our strategy.

Consider a world where you make this kind of announcement: "I won't make it to work today on news of disappointing fourth-quarter earnings for Exxon."

Or you explain away a failure by saying, "I didn't clean up the kitchen because of rumors that Netflix is raising their monthly fees."

Wait a second. Maybe this all makes sense. And if it doesn't, that's probably due to rumors that the Fed may boost the prime rate.

Reach Brad Stanhope at bradstanhope@outlook.com.