Right around 12pm PST (3pm EST), at the start of the last hour of trading, today stocks started taking off. The Dow went from being up about 80 to all of a sudden being up about 130. I had no idea why.
The reason was that The New York Times reported that a group of investors, including Warren Buffett, were in talks to buy a stake in beleagured investment bank Bear Stearns (BSC).
You can see when the news broke from this 1 Day Chart of Bear Stearns.
And you can see from this 1 Day Chart of the S&P that that news buoyed the entire stock market.
Truly amazing how the stock market instantaneously processes new information isn’t it?
Also interesting how stocks, including Bear Stearns, trailed off the rest of the day after the initial dramatic spike suggesting that perhaps the first reaction was a bit of an overreaction. Efficient markets … but not completely: we’re still human beings.