Gathering Gloom: In a Bearish Market, Even the Good News Can Have a Bad Effect --- So, If Economy Strengthens, Many See Inflation Ahead And Rush to Sell Shares --- Just Darkness Before Dawn?
In a bear market, sometimes any news is bad news.</br></br>When unemployment hit a nine-year low Jan. 8, stocks responded with a 140-point plunge in the Dow Jones Industrial Average. Some investors were worried: A strong economy might step up inflation.</br></br>When December's inflation came in at just 0.1% a few weeks later, some traders still saw only gloom: Federal Reserve Governor Wayne Angell warned that the Fed might tighten credit because the 4.4% inflation for all 1987 was too high.</br></br>And when a slew of high-tech companies such as NCR Corp. reported earnings that matched or exceeded expectations on Jan. 20, that was still bad news: Their stocks fell on fears that their earnings will crumble in 1988.</br></br>Individually, such reactions may be perfectly logical. Together, they add up to bear-market psychology. "As a rule of thumb, in a bear market, bullish news hardly matters, and bearish news has a dramatic impact," says George Pirrone, a stock trader at Dreyfus Corp.