Why stock prices change depending on news?


Stock prices move up and down every minute due to fluctuations in supply and demand. If more people want to buy a particular stock, its market price will increase. Conversely, if more people want to sell the stock, its price will fall. The ratio between demand and supply is due to the Type of news that is issued at any given time.

How The News Affects Stock Prices

Negative news will tend to force a person to sell the shares. Bad earnings reports, poor Corporate governance, economic and political uncertainty, and unexpected, accidents increase and a decrease in stock prices.

Positive news usually cause people to buy stocks. Good earnings reports, improving corporate governance, new products and acquisitions, as well as positive economic and political indicators, transfer demand and the increase in the stock price.

For example, a hurricane, a landslide could trigger a fall in energy stocks. Meanwhile, depending on the severity of the storm, insurance stocks can also take a hit on the news (or even climb higher if the expected damage is projected to moderate).

The impact of unexpected news

But it is difficult, if not impossible, to capitalize on the news. The impact of new information on stock depends on how unexpected the news is. This is because the market always takes into account the expectations in prices.

For example, if a company comes out with a better-than-expected profits, share prices will probably jump. But if the same profit was expected by most investors, the stock price is likely to remain the same as the profit is already factored into the stock price. Thus, this unexpected news – not just any news – that helps drive prices in both directions.

(For further reading, see what causes prices to change? and trade on the news.)

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