Shhhhhhhh! Dow Loses Nearly 2,300 When Bernanke Talks

     When Federal Reserve Chairman Ben Bernanke speaks, Wall Street listens – and investors should beware. The Dow Jones Industrial Average (DJIA [1]) has lost nearly 2,300 points on days he has spoken, including three of the worst point losses ever.

     “Every time President Bush, Ben Bernanke, every time [Treasury Secretary Henry] Paulson – every time they get on the air, the market just drops in concert with every word that comes out of their mouth,” CBS “The Saturday Early Show” anchor Chris Wragge pointed out on Oct. 11.

     It’s especially true of Bernanke, who is highly visible thanks to the financial cable channels – CNBC, Bloomberg and the Fox Business Network – which interrupt their regularly scheduled programming to televise Bernanke’s public remarks.

     Over the past six months, the Dow Jones Industrial Average (DJIA [1]) has lost a total of 2,291 points during the 20 days listed on the Federal Reserve Board’s Web site that Bernanke delivered public remarks. That’s more than half of the 4,084.11 points the market has lost in that time. Bernanke’s next high profile speaking engagement is scheduled for Dec. 4 at the Presidents’ Conference on Homeownership and Mortgage Initiatives [2] in Washington, D.C.

     In fact, the Dow recorded three of its 10 worst daily point losses ever on three of those days he spoke, including the whopping 733 drop on Oct. 15 [3] – the second-largest point loss ever.

     As Fox Business Network “Countdown To the Closing Bell” host Liz Claman pointed out Oct. 16, Bernanke’s speeches aren’t the sole source of the market drop, but his forecasts – specifically is Oct. 15 speech before the Economic Club of New York – can initially spook the markets, creating a snowball effect and the subsequent 733-point lower close.

     “Ben Bernanke, the Federal Reserve chair, [host Julie Chen], was speaking earlier,” Claman said on CBS’s Oct. 16 “The Early Show.” “It’s not as if he said and dropped some kind of stink bomb on the markets, but he did give an indication that we would see protracted weakness for the next couple of quarters, perhaps, and then boom, in the last hour or two, people just got spooked. The horses started running out of the barn, and there was no way to get them back in.”

     Bernanke’s latest speech, to the Greater Austin Chamber of Commerce, Austin, Texas, on Dec. 1 [4], sent the Dow Jones spiraling downward 679 points – its fourth biggest point drop ever.

     “Despite the efforts of the Federal Reserve and other policymakers, the U.S. economy remains under considerable stress,” Bernanke said. “Economic activity was weakening even before the intensification of the financial crisis this fall. The sharp falloff in consumer spending during the summer was particularly striking. According to the latest estimates, real gross domestic product (GDP) declined at an annual rate of 0.5 percent in the third quarter, with personal consumption falling at an annual rate of 3.7 percent.”