why do stock prices go up and down
Why do stock prices move up and down? The main reason for movements in a company s stock price is due to supply and demand. A company s performance exceeds expectations of the public. Lots of people want to buy the shares to reap the rewards of the profits. Not many people want to sell the shares. There are not many shares left. A company s performance is disappointing compared to expectations of the public. Lots of people want to sell the shares.
Not many people want to buy the shares. There are too many shares. However there are several external factors that affect a company s stock price. Very often news about a company will will drive
price up or down. Let s say a company announces they are expanding operations into a new market that has lots of new potential for growth this might boost the price of the shares because shareholders will anticipate a higher rate of earnings growth.
Similarly, if a company announced that there was a problem with a new highly anticipated product and its product launch was going to be delayed, the share price would likely go down because investors would be disappointed and expect less sales of the product. Usually a lot of uncertainty or fear will drive shares down. And a lot of optimism and excitement will drive shares up.
Overall economic conditions can influence behavior of the markets overall and drive shares of most stocks up or down. When the economy is strong overall, shares are more likely to go up. When the economy is weak and there are bad economic circumstances such as recession, shares of most stocks will tend to go down. Others macro-economic factors influencing the stock markets include inflation rates, interest rates, employment rate and natural disasters.
Other factors influencing behavior of the shares of individual companies include job cuts, company mergers and changes in company management to name just a few. When a company does well in the marketplace, financial indicators such as revenue and earnings rise. When companies publicize these healthy fundamentals, theirВ stock price is likely to rise as well.
In the long run, no matter what happens to prices from day to day, a healthy, growing company's stock price should increase. Investors themselves can make stock prices rise through optimism. If the market becomes upbeat about a companyвs future, demand for the stock will jump as investors value it more highly, causing the price to rise. This effect of market valuation makes stock prices fluctuate daily and weekly.
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