Fear and hype on Wall Street

David Cay Johnston, the former New York Times busienss reporter, writes on The New Republic Web site that some recent media coverage of the markets borders on instilling fear in consumers.

Johnston writes, “Stock indexes matter in terms of percentage changes, not point changes, because the base changes all the time. How many points an index like the Dow or the broader Standard and Poor’s 500 went up or down compared to the day before, or over a week, or over another contracted time period is a legitimate measure when trying to figure out the short-term direction of the market. But when you are comparing it to trading from say 2001 or 1987 or 1929, counting points, instead of percentages, is absurd.

“My first thought when scanning the nightly news programs was that this was just another example of how journalists, broadly speaking, are innumerate and so errors pop up when it comes to numbers. But the subsequent words in the ABC and NBC reports made it clear that someone on the writing and producing staff knew just what they were doing. This was not an error; this was fear mongering.

“Williams, for example, reported in the first story segment that ‘stocks fell off a cliff, the largest single point drop in history.’ If someone knew enough to write ‘point drop,’ and later the correspondent Tom Costello used the right measure–the percentage drop–it suggests the writer of Williams’ intro was more interested in hype than sober facts.”

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