Even when news has occurred, there can be sharp disagreement
overwhatnews caused the market change. On November 15, 1991, when
the Dow fell over 120 points or nearly 4 percent, Investor’s Business Daily
ran an article about the market entitled “Dow Plunges 120 in a Scary
Stock Sell-off: Biotechs, Programs, Expiration and Congress Get the
Blame.”^2 In contrast, the London-based Financial Timespublished a
front-page article written by a New York writer entitled “Wall Street
Drops 120 Points on Concern at Russian Moves.” What is interesting is
that such news, specifically that the Russian government had suspended
oil licenses and taken over the gold supplies, was not mentioned even
once in the Investor’s Business Dailyarticle! That one major newspaper
can highlight “reasons” that another does not even report illustrates the
difficulty of finding fundamental explanations for the movements of
markets.
UNCERTAINTY AND THE MARKET
The stock market hates uncertainty, which is why events that jar in-
vestors from their customary framework for analyzing the world can
have devastating effects. September 11 serves as the perfect example.
Americans were unsure what these terrorist attacks meant for the future.
How severe would the drop in air travel—or any travel—be? How big a
hit would the approximately $600 billion tourist industry take? Unan-
swered questions generate anxiety and declining prices.
Uncertainty about the presidency is another downer. The market
almost always declines in reaction to sudden, unexpected changes re-
lated to the presidency. As noted previously, President Eisenhower’s
heart attack on September 26, 1955, caused a 6.54 percent decline in the
Dow Industrials, the seventh largest in the postwar period. The drop
was a clear sign of Eisenhower’s popularity with investors. The assassi-
nation of President Kennedy on Friday, November 22, 1963, caused the
Dow Industrials to drop 2.9 percent and persuaded the New York Stock
Exchange to close two hours early to prevent panic selling. Trading re-
mained suspended the following Monday, November 25, for Kennedy’s
funeral. Yet, the following Tuesday, by which time Lyndon Johnson had
taken over the reins of government, the market soared 4.5 percent, rep-
resenting one of the best days in the postwar period.
When William McKinley was shot on September 14, 1901, the mar-
ket dropped by more than 4 percent. But stocks regained all of their losses
226 PART 3 How the Economic Environment Impacts Stocks
(^2) Virginia Munger Kahn, Investor’s Business Daily, November 16, 1991, p. 1.