News Is In The Driver’s Seat

October 12, 2001
Marc Dupee

Starting a month ago
yesterday, citizens across the country were glued to their television sets
obtaining information about the worst terrorist attacks ever in the United
States. And many remained tuned in for hours a day for the remainder of the
week following the September 11 disaster, striving to make sense of the massacre.

The hunger for news
and information has a term, the CNN-Effect, and today traders got one of
their first statistical views of the impact on the economy of the
phenomenon. Retail sales took their biggest drop in 10 years, suggesting
the economy will continue to slow. Stock indexes started lower on the news,
but rallied off the down opening to match yesterday’s close.

But an early
afternoon consolidation near Thursday’s close has given way to an abrupt
sell-off following news that an NBC employee tested positive to an anthrax
infection of the skin.

The Dow is down 182
at 9228, the Nasdaq is down 38.29 at 1663.38, and the S&P 500 is down
21.15.

One of the recent
go-go stocks in the biotech area, Cepheid
(
CPHD |
Quote |
Chart |
News |
PowerRating) jolted up $2 on the
anthrax news. Cepheid makes products that speed the testing of biological
contaminants and is up 2.58 on the session at 8.07. The stock is down from a
high of 11.48 from two days ago.

One thing to bear in
mind, news events tend to exaggerate technical features of a market, helping
to accelerate a market to where it wants to go. The S&P 500 and the
Nasdaq both filled their gaps left after the 9/11 attacks and are short-term
overbought. Three up signals from the Market
Bias Indicators Page suggested stock index futures were overbought and could trade lower.

News Is In The Driver’s Seat

BUY THE FEAR, SELL THE GREED

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