One thing I've always wondered with these headlines: how do they establish causality? Do they ask some pundit why shares dropped 10% in a day and run with that?
I remember reading an interview (probably in one of Jack Schwager's Market Wizards books) with a guy who had been a Wall Street analyst. He kept the news reports of the day sorted into "good news" and "bad news" piles on his desk. When a journalist called to ask why something had gone up that day, he'd cite whatever was on top of the good news pile. When asked why something had gone down, he'd cite whatever was on top of the bad news pile.
In short, markets move around for a whole host of random reasons.
The nightly news 'the market moved lower on profit taking' or 'the market moved higher on positive news X' is just rubbish.
Occasionally, there is a cause-and-effect like an unexpected interest rate change, or a better-than-expected sales figure in a key industry, but for the rest of the time, it's just random movement.
The worst thing is the need to commentate on it confuses the correlation in the general publics mind, so people believe you can talk the economy up or down, which is an assertion I don't agree with.
Typically you buy a tech stock for growth since they rarely pay dividends. When you see that the growth is negative and potentially accelerating there is probably little reason to hold the stock-particularly when they have no earnings.
Yes, but that doesn't answer the question. Sure, it makes sense that there's not much reason to hold stock when the growth is negative. The question was: how do you decide why the growth is negative? This is an important, because sometimes stocks dip for a day, and sometimes they dip for a decade. Knowing why would seem to be the best basis for investing.
The reality is a bit murkier. Usually a hedge fund "leaks" info to the journalists (someone familiar with the matter is the standard euphemism) which is sufficiently plausible so as to become the reality
the same formula can be used with not correlation but simply timing:
"As Rome burns, Nero fiddles away."
"Detroit housing prices at record prices, even as millions leave the city."
"As the average salary in the City approaches six figures, those without a job are having trouble finding any job at all."
Does it make sense to set this backdrop, even without correlation? Of course - it's interesting.
however, in this case the author does a good job by setting this backdrop:
if the craze of playing games on Facebook has waned -- something the article hopefully establishes or reports on,
then it is an interesting backdrop to news that Zynga's share price is falling - wouldn't you say?
(If fewer people are playing Zynga's games on Facebook, which is where most of Zynga's games are played.)
Whether this is just a backdrop or a causal relationship with Zynga's profit and share price is for you to decide however you want. The headline doesn't force it on you, but simply set a backdrop of a macro-trend.
I think it's a very interesting and well-written headline. It's better than most of them.
The headline might not argue causality but I think it certainly is written in a way to imply it. This is a common structure for headlines about stock prices moving large amounts in either direction. The average reader does not like to think that finding a singular reason for something like this is impossible.
