Tyler Cowen noted that traders apparently thought Bush won the debate. Pundits disagreed, and the traders came around. Bush wins futures have been declining since the debate (the current last trade is 60.9, above five points below pre-debate levels).

I suspect something like Cowen’s second reading is correct:

Second, the press is better at reading the debates than are the bettors. The bettors got it wrong at first, but fell into line once the press spoke.

I experienced something very similar. I listened to the first half of the debate while working, not paying very close attention to the debate. It seemed that Bush was winning — he hammered home is message, while Kerry seemed muddled.

Over the weekend I watched the entire debate, giving it my full attention. Now my perception is that Kerry clearly won. Bush stayed on-message, but was on the defensive. Kerry didn’t seem muddled when I paid attention.

I don’t really think the press is better at reading debates. Rather, I think the press was paying attention. Traders were probably paying as much attention to what other traders were doing than the debate itself. Better judgement quickly found its way to market.