Wall Street Is a Short-Attention Span Theater for Obama’s Speech

Investors had a there’s-not-much-to-see-here reaction to the president’s State of the Union address and turned their focus quickly to something else on Wednesday morning

The Dow Jones industrial average, the Standard & Poor’s 500-stock index and the Nasdaq were all down less than 1 percent Wednesday morning, the day after President Obama’s speech. He touched on more Main Street-focused issues, including immigration reform, jobs and the environment, and investors appeared to be more interested in gleaning whatever information they can about cuts in the Federal Reserve’s bond-buying program when the central bank issues its statement at 2 p.m. after a two-day meeting.

“What’s going on this morning is very much a continuation of what’s been going on this year,” said Barry Knapp, the head of Barclays US equity portfolio strategy.

A muted reaction is fairly typical to a State of the Union address, which is generally sterile and scrubbed over. The Dow has almost never moved more than 2 percent the day after an address, according to data compiled by the Wall Street Journal Market Data Group that tracked reactions back to 1961.

The worst response to a presidential State of the Union address came in 2000, when the Dow fell 2.6 percent the day after President Bill Clinton’s speech on Jan. 27. The speech came amid investor fears about employment costs and higher interest rates.

The Dow rose 1.9 percent after President George H.W. Bush delivered his address on Jan. 29, 1991, the biggest market reaction to a president since 1961. While the Gulf War raged, Mr. Bush addressed a banking overhaul that would help break down barriers between commercial banks, investment banks and stock brokerage firms.

Analysts had been listening on Tuesday night for clues about tax reform and mortgage lending. While President Obama made a passing reference to corporate tax reform, those remarks did not appear to have much of an effect on after-hours trading when they came up.

“I looked to see if there was a market reaction, and there was not one,” Mr. Knapp said.

One reason, Mr. Knapp suggested, could have been that tax reform was mentioned in the context of job creation, a focus throughout Mr. Obama’s speech.

“Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation,” President Obama said. “Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs right here at home.”