Bad economic news is good for stocks?

FRIDAY's trading session on Wall Street when the Dow Jones Industrial Average first plunged 258 points before closing with a net gain of 200 may have displayed all the hallmarks of a short squeeze, but coming as it did after the release of a weak jobs report, it is also suggestive of a market which does not know whether an interest rate hike would be good or bad.

There is a school of thought which emerged after last month's Federal Open Market Committee (FOMC) meeting that argued a hike was needed as it would have resolved a huge unknown in the minds of investors and enabled the market to get on with business as usual. By holding rates steady while referring to China, a hugely volatile and opaque market, as the reason, the Fed had erred badly as it has added uncertainty.

On this side would be those who subscribe to the view that "good economic news is good for stocks'' , and whose proponents would point to massive volatility and broad-based weakness for equities everywhere since that FOMC meeting ended on Sept 17 as a consequence of the Fed's inaction.