You see it in the news every day. “Today the market was up because of investor enthusiasm from comments by the Federal Reserve…” or something similar. Being the investigative journalist I am (sorta) I though I’d find out exactly how writers in the financial press come to that conclusion. I wrote to one of the reporters for the Wall Street Journal, and here is the response I got: “In general we call a bunch of investors to get their sense of what’s moving the market.” She also said: “We do try to provide readers our best sense of why the market is up or down.”
I find this fascinating for two reasons. First, the opinion of what is moving stocks on a given day is reported based upon the opinions of a few people. These are people who have an opinion about why stocks may be up or down. Someone who has no opinion they don’t report it. At least not that I’ve seen. Imagine if they reported: “Fred Smith at Consolidated Investments said ‘I have no clue why stocks are up today’. Don’t think I’ve seen that story yet.
Second, is the expectation that the reporter has that they can get a ‘best sense’. Does the news move financial in the short term? Sometimes. But not in predictable ways. How many people actually say “Hmmm, gold is up $5 an ounce, I’ll hold off on buying Microsoft today”.
Remember too that in all stock trades there is always a buyer and a seller. So what you’re really looking at is not more buyers or sellers, but rather more market rather than limit orders.
The financial press has to report something every day, it’s their job. But just because they say it doesn’t make it so. You’re looking at a few people’s opinions about the buy and sell orders of many thousands of stocks. There are many thousands of reasons for those decisions, not just what the reporter said in his/her story. So take what they say with a grain (or pillar) of salt.