(MONEY Magazine) – For all the carrying on, you'd think the world was ending. Turn on any of the cable-television business channels, and you'll be overwhelmed with catastrophe. The anchors may be chipper and well coiffed, but their stories are out of the Apocalypse. The funny thing--and I mean funny weird, not funny ha-ha--is that these are the same people who were so thoroughly upbeat about the stock market just 18 months ago. I guess they changed their minds. In fact, all of the financial media, including the Internet, seem to be suffering from mood swings--and right now they're in a depressive phase. Mocking this unbridled pessimism may seem like a cheap shot, but the media's tone can actually mislead investors.

It's a pity that Marshall McLuhan is dead, because today's financial journalism is proving his theory that the medium determines the message. The proliferation of news outlets over the past five years has stirred up a demand for more news than actually exists. And since business channels can't fill up all their slow days by rehashing the Chandra Levy case, they've instead created a giant echo chamber that reinforces whatever the prevailing stock market trends happen to be.

Let me say right off the bat that I don't blame the journalists for this problem. Distorted stock market coverage is an unintended consequence of today's business realities. Newscasters simply can't afford to acknowledge that nothing much is happening on any given day. Instead, they have to pump up the day's strongest story to the max--whether it's as important as an appeals court overturning the judge's order to break up Microsoft or as negligible as a chipmaker falling short of its earnings targets by a few cents.

Moreover, few journalists have the time or the expertise for original research and analysis. And they don't usually know much stock market history. The result is that most stories simply highlight whatever information is most inflammatory. Context just doesn't sell very well.

Even minor disappointments that any experienced investor would accept with resignation are made to seem fresh and urgent. The unsurprising fact that corporate profits decline in an economic slump is apt to be reported with alarm.

Similar problems afflict all kinds of news. But stock market coverage suffers particularly badly because share prices respond chiefly to investors' expectations about the future rather than current events.

Today, in fact, investors might as well turn off their TVs and start trying to figure out the market's fundamental trends themselves. It's no shock that recent earnings reports have been terrible--that's old news. Today's share prices already anticipate lousy earnings through the rest of the year.

When it comes to the outlook for share prices over the next 12 months, what really matters is the fact that the Federal Reserve has pushed the economy's gas pedal to the floor with six interest-rate cuts since January. Rates have been reduced by similar amounts eight times in the past. And in only one of those cases--during the Great Depression--did the Dow continue falling.

In short, the odds are high that a stock market recovery is already under way. Just look at the behavior of share prices. Stocks began falling more than a year ago and collapsed in the first quarter. But the major indexes all posted solid gains in the second quarter--even as journalists were holding recession watches.

Not all market sectors will rebound at the same speed. Overbuilding left the telecommunications industry with excess capacity, while overly zealous lending has saddled banks with lots of problem loans. But both sectors will eventually recover. They just need a little extra time.

Overall, market momentum has turned positive--and a few industries will account for most of the growth. Among computer companies, I like IBM (IBM) and Microsoft (MSFT), which are up more than 25% this year. For telecom, I'd favor local phones like Verizon (VZ) and SBC Communications (SBC). Contrarian investors should look at the deeply depressed infrastructure plays like Corning (GLW) for fiber optics and Cisco (CSCO) for networking hardware.

Among growth stocks, the natural counterweight to technology is health care. Pfizer (PFE) is a good choice for investors willing to pay up for growth. And Merck (MRK), which has a lot of big drugs coming off patent, is the industry's value play. (For more on drug stocks, see "The Real Growth Stocks" on page 100.) For patient investors, another key sector is the banks, such as J.P. Morgan Chase (JPM), Citigroup (C) and MBNA (KRB).

It's also worth looking at smaller companies. Their share prices were up more than 20%, on average, in the second quarter, compared with a tiny 3.5% gain for the biggest growth stocks. Promising picks among the little guys include Baxter International (BAX), which makes sophisticated medical equipment, and Millipore (MIL), which produces water-purification systems for high-tech uses.

And don't forget to include a couple of top media stocks like this magazine's owner, AOL Time Warner (AOL), or Viacom (VIA) in your portfolio. However much the proliferation of news outlets may warp stock market coverage, demand for news and entertainment just keeps on growing.

Michael Sivy can be reached at sivy_on_stocks@moneymail.com.