The predatory traders were ready and waiting for the “dumb money” to come flowing into the stock market on Monday, in the wake of Osama bin Laden’s death. Sure enough, the three major stock indices jumped right into positive territory after the opening bell, continuing their climb until just after 11:00, when the downhill trek began. Although many retail investors were counting on a significant market rally as a result of the operation resulting in Obama’s “termination with extreme prejudice”, they were in for a big disappointment.
Renowned investment authority, Mark Hulbert, wrote an interesting essay for MarketWatch on Monday, discussing how non-economic, historical events have never significantly affected the stock market. Hulbert brought our attention to a 20-year-old study, conducted by three economics professors: James Poterba of MIT as well as Harvard’s David Cutler and the infamous Larry Summers. Here is Hulbert’s assessment of the study:
The result was a list of 49 distinct events, such as Pearl Harbor, the Korean War, Kennedy’s assassination, and so forth. The professors then measured the average absolute return of the S&P 500 index on these days.
The professors came up with little evidence that non-economics events had a big effect on the stock market.
On average across all 49 events on their list, the S&P 500 moved just 1.46%, less than one percentage point more than the 0.56% that prevailed on all other days. Because of this small difference, the professors concluded that there is “a surprisingly small effect of non-economic news” on the stock market.
The Dow Jones Industrial Average lost only 3 points on Monday, closing at 12,807 for a loss of just 2 basis points (0.02 percent). The S&P 500 lost 18 basis points (0.18 percent) to finish at 1,361. The Nasdaq Composite fared worse, losing 33 basis points (0.33 percent) to close at 2,864.
Miami-based corporations had a mixed day on Monday. Ryder System (R) was the only member of the group to finish in the green, with a gain of 22 basis points (0.22%) to close at 53.62. Carnival Cruise Lines (CCL) sank by only 5 basis points (0.05%) to finish at 38.05. Royal Caribbean (RCL) sank by 63 basis points (0.63%) to close at 39.57. Lennar (LEN) had the worst luck, with a loss of 3.32% to end the day at 18.36.
The following companies will be playing “beat the number” on Tuesday, with the release of their quarterly earnings reports: American Reprographics (ARC), American Tower (AMT), Archer Daniels Midland (ADM), Avon (AVP), Beazer Homes (BZH), Cardionet (BEAT), CBS, Century Aluminum (CENX), Cephalon (CEPH), Charter Communications (CHTR), Checkpoint Systems (CKP), Colfax (CFX), Comcast (CMCSA), Denny’s (DENN), DigitalGlobe (DGI), DineEquity (DIN), Dole Food (DOLE), Duke Energy (DUK), Emerson Electric (EMR), First Solar (FSLR), Fresh Del Monte Produce (FDP), Genworth Financial (GNW), Green Mountain Coffee Roasters (GMCR), Harris (HRS), Hyatt Hotels (H), Incyte (INCY), Jazz Pharmaceuticals (JAZZ), Key Tronic (KTCC), Legg Mason (LM), Level 3 Communications (LVLT), Lexicon Pharmaceuticals (LXRX), Marathon Oil (MRO), Mastercard (MA), McKesson (MCK), Molson Coors Brewing (TAPA), Open Table (OPEN), Papa Johns International (PZZA), Peets Coffee & Tea (PEET), Pfizer (PFE), Plantronics (PLT), Sirius XM Radio (SIRI), TECO Energy (TE), Valuclick (VCLK), Wabash National (WBC) and WebCom (WWWW). Good luck!