When Stocks Soar

If a stock ever moved resolutely sideways, it was Wachovia. From September 2004 until September 2007, it basically traded at $50 a share: sometimes a little less, sometimes a little more. And then it started a year-long decline, which culminated in a final drop to zero (plus option value) on Monday. Wachovia's shareholders have been wiped out: the stock closed at just $3.50 a share today -- that's down 65% from where they closed on Friday.

Now anybody who listens to the WSJ's style maven will try to avoid hyperbole:

Words like plummet and plunge -- and soar and skyrocket, for that matter -- quickly lose their shock value when they are overused. Such words should be considered what Bryan Gruley in Chicago calls "think first" words -- think about them before you apply them.

Still, if words like plummet and plunge are ever appropriate, I think they can reasonably be used here, in the case of Wachovia. It's not like stocks ever trade below zero. So one could forgive the WSJ's markets reporter, Peter McKay, for getting out the "think first" words today. Until you notice which "think first" word he actually used:

Other financial bellwethers posted big gains. Citigroup jumped 16%, Wachovia soared 90%, and Wells Fargo was up 13%.

According to the WSJ, Wachovia didn't plummet, it hasn't plunged. Instead, it soared.

In the real world, however, Wachovia rose just $1.66 per share -- a modest move indeed for a bank of its size. The market is still valuing Wachovia's equity at zero; it's just that the option value on those shares increased a little. And there's simply no way that Wachovia is a "financial bellwether" any more. Wachovia stock is trading entirely on the way in which the bank gets taken over; it has nothing to do with the health of financials more generally.

And while I'm on the subject of market reports, can someone explain to me how "widespread hope that a bailout plan for Wall Street will be revived in Congress" would send the S&P 500 steadily up 5.42% on the day? Did the chances of a bailout bill getting signed into law increase significantly between 1pm and 4pm? Because stocks did.

Now I'm happy to hope/admit that what we saw today might have been more than just a "dead cat bounce", as I described it before the markets opened. Dead cats aren't normally that bouncy. But it would still help a lot if market reports put stock moves in much more context than they do. Wachovia's $1.66 rise today does not a soaring stock make, and stock-market volatility is not prima facie evidence for "a rush of buyers attracted by bargains". A little less breathlessness and a little more detachment would go a long way, in these unusually crazy times.