Media's Volatile Coverage of Stock Market: 'Armageddon' or 'The Sky's Not Falling'

As the stock market went up and down over the past few weeks, media coverage also bounced from end-of-the-world rhetoric to rational analysis.

CNBC’s Jim Cramer went on an impassioned rant August 6 calling for the Fed to reduce interest rates.

“Bernanke needs to open the discount window. That is how bad things are out there … in the fixed income markets we have Armageddon,” said Cramer on “Stop Trading!” Following Cramers’ rant, NBC brought him on “Today” to analyze the economy August 10.

NBC’s Meredith Vieira asked “Are the markets about to crash?” on the August 10 “Today” show.

Contrast that with CNN's Ali Velshi on August 13:

“But you know, after all that volatility last week, after all ‘the sky is falling,’ take a look at how these markets did in the United States over the last week. The Dow was actually up.” Velshi continued on “American Morning:” “Now for markets to this point this year, in August, we are looking at a Dow that is up more than 6 percent so far for the year. That’s not terrible. The sky’s not falling, actually. The S&P is only up about 2.5 percent and the Nasdaq is up above 5 percent.”

Wall Street’s ups and downs have been linked to problems of mortgage defaults, particularly “subprime” or high-risk mortgages. The Federal Reserve Bank did not choose to lower interest rates, but it did step in the week of August 6 to “inject liquidity” – put simply, cash to back up possible withdrawals – to help calm panicky markets.

Though that was a normal action for the Fed, journalists acted as though the market was on the verge of catastrophe.

Maria Bartiromo called it an “extraordinary move” on “NBC Nightly News” and Charles Gibson said “It may be the most important economic event since 9/11” on “World News” August 10.

Really? More important than record stock market highs, virtually full employment, 47 months of straight job growth, growing GDP and low inflation?

Economist Brian Wesbury of First Trust Advisors L.P. told Business & Media Institute that the media got it wrong. This wasn't an "extraordinary move" on the part of the Fed, in fact the Fed adds an average of $9 billion a day in liquidity according to Wesbury.

Still panicked journalists worried that the "credit crunch" could lead to big problems: recession or a stock market crash.

“Do you think that we could go into recession?” CNN’s personal finance editor, Gerri Willis asked on CNN’s “Open House” August 11.

ABC's Chris Cuomo thought the market had already crashed on August 13.

“A slight increase in a rate can be a burden, or it can mean that they literally cannot afford to buy a home, and that will be a tragedy that goes far beyond the crashing of the stock market,” said Cuomo despite the fact that the stock market hadn’t crashed.

Still, Meredith Vieira asked if the “markets [were] about to crash” on “Today” August 10. CNBC’s Erin Burnett compared the similarities between 1987 and 2007, but concluded that ““a lot has changed” and that the mortgage problems “might not actually cause a crash.”

But Vieira kept pressing the question, asking CNBC’s Jim Cramer, “Are we headed for another Black Monday?”

Even Cramer, who had called the fixed income markets “Armageddon” earlier in the week replied, “Not even a chance … I think there’ll be a slowdown – I don’t want to say a recession—because of this problem.”