When Donald Trump tweeted his displeasure with Nordstrom on Wednesday for its decision to stop selling his daughter Ivanka’s merchandise, the retailer’s shares quickly dropped about 0.5 per cent. Yet within the hour they had rallied and by the end of the day they closed up more than 4 per cent.
The same day, the president typed out words of praise for Brian Krzanich, after the Intel chief executive announced plans for a $7bn investment in an Arizona semiconductor factory. That tweet generated even less excitement, leaving Intel’s stock almost unmoved.
Despite companies’ fears that one angry Trump tweet can decimate a group’s stock market valuation, these muted market reactions are the norm, according to a Financial Times analysis of the commander-in-chief’s use of Twitter since the beginning of 2017.
On average, a tweeted Trump insult has almost zero impact on the targeted company’s share price within an hour of investors having a chance to react. Praise from Mr Trump, on the other hand, has on average led to about a 1 per cent bump in the target company’s stock price in the first trading hour that follows it, although that effect typically starts to dissipate within 24 hours.
Praise does not guarantee a positive share price move. For example, in mid-January Mr Trump tweeted, “Thank you to General Motors and Walmart for starting the big jobs push back into the U.S.!”. In the hour after the tweet, Walmart stock rose a bit, but GM’s stock price sank about 0.3 per cent. Twenty-four hours later, the companies’ stocks were down about 1.2 per cent and 0.7 per cent, respectively.
Media companies have been Mr Trump’s most regular Twitter targets since the beginning of the year. The New York Times, NBC and CNN in particular have each been subjected to presidential vitriol a few times, but if Mr Trump hoped to financially wound those organisations with his tweets, he fell short.
Mr Trump’s opprobrium has had no negative effect, on average, on the share prices of the news outlets’ parent companies. A Trump Twitter insult targeted at a media brand correlates on average with a minuscule drop in share price over the course of an hour, followed by a slight bump by the end of the day.
Time Warner, the parent company of CNN, reported on Wednesday that it beat fourth-quarter revenue estimates, thanks in part to CNN, which had a record year in 2016. The New York Times reported its biggest-ever boost in digital subscriptions, part of which came in a post-election surge.
This is not to say that Mr Trump’s Twitter feed offers no opportunity for fast-moving investors. A report from S&P Global Market Intelligence shows that the president’s tweets do appear to have a short-term impact on how markets see a company’s credit risk. The commander-in-chief’s tweeting also seems to have an effect on the Mexican peso.
The sample size so far in 2017 includes fewer than three dozen company-related tweets, and it is also possible that Mr Trump’s Twitter use could yet cause sharper share price moves.
A tweet about a policy with large ramifications for a company, for instance, could have a more serious impact on its stock than a tweet expressing his distaste for a certain group. However, previous tweets about inflicting potential penalties on companies have had no such impact. When Mr Trump tweeted that General Motors should build its Chevrolet Cruze model in the US or pay a “big border tax”, the carmaker’s share price went up.
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