Wall St. braces for ‘headline risk’

By Jessica Holzer
How much can an ambitious Congress and a bunch of journalists shake Wall Street?
On Jan. 25, stock prices of several credit card companies took a beating.
The reports that hit the financial wires surely made the credit card executives wince. “Senate targets credit card practices,” one teaser on Yahoo! Finance read. “Critics seek clampdown on credit firms,” Reuters wrote.
But more importantly, those headlines rattled the market.
The episode illustrates the phenomenon of “headline risk,” or the damage a negative news story causes to a share price in the absence of any fundamental change to the company’s prospects or the business environment.
Oh no! Not the Credit Cards! Wonder why negative news stories don't seem to be having any impact on Bush and others on the Hill?

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