What Really Moves the Stock Market?

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The stock market pushes or drags your asset’s value with it. When it soars, you feel the highs, and when it dips, you feel the pain. But what really moves the stock market?

Identifying trends in times of market volatility can be invaluable to your investing strategy. Knowing how they affect your holdings is the icing on the cake.

We will look at what moves the overall stock market and your individual investments. If you keep up with your assets, you will be better able to determine whether they are performing comparatively well amidst swings.

Why Do Stocks Move?

Several factors can drive the market and your investments, from fundamental and technical elements all the way to sheer market sentiment. Making the connection can be like reading tea leaves, but we’ll try to make it easier for you.

Things That Drive Stock Prices Higher

Positive indicators include optimistic interpretations of news, and anything a company does that shows promise. One remark from a Federal Reserve Board member on a major company’s earnings report can increase the indexes. Even one sector indicator, like a swing in the price of oil, can move the entire market.

What Drives Stock Prices Down

The same factors that cause upward movements can, conversely, throw a wrench into the market. If that same Fed member hints at higher interest rates, the market usually dips in an

Several Factors Move a Stock Price Up and Down

Many internal and external factors drive the moves of individual stocks. Some of these factors are easier to analyze than others, but when you monitor your stocks, look for the following:

Supply & Demand

Supply and demand is the most simple and essential element in why a stock changes price. If more people buy a stock than sell it, demand and price increase. If more people are selling than buying, the price drops. The number of outstanding shares on a company’s balance sheet can be a good indicator.

Company Health

What is a company worth? Analysts determine the value of a business through its market capitalization or the stock price multiplied by the number of outstanding shares. But you can also factor in the potential for growth and fundamentals such as earnings per share (EPS) and price to earnings (P/E) ratio.

News & Innovation

Good news makes people want to buy a stock, and bad news causes a sell-off. The announcement of a major change among company executives affects the price. Earnings reports and how they compare to analyst projections are often big movers.

If a business introduces a game-changing innovation, investors will pick up on that. The COVID epidemic brought us many examples of innovation drivers as pharmaceutical companies raced for new ways of testing and vaccines.

Trader Sentiment

Perception sometimes overtakes reality when it comes to stock trends. If investors believe in a company or sector, they may invest in faith rather than fundamentals.

The dot-com bubble of the 1990s exemplified this as people sank money into online businesses without knowing how they actually generated revenue. The boom went bust, and many companies went under, taking their shareholders with them.

Global Factors Can Move The Entire Stock Market

The global economy covers many factors that affect stock prices, too. That means that events far away from Wall Street can drive the market.

A foreign war may lift stocks in the defense industry but drop prices in other sectors that require a smooth supply chain. The war in Ukraine has been a perfect example.

Inflation or Deflation

You know it when you go to the store, but the inflation rate is a factor in the overall economy. High inflation is usually bad for stocks, while low rates are generally good.

Deflation, however, indicates a loss in pricing power for companies and is also usually bad for stock prices.  

Federal Interest Rates

The Federal Reserve tiptoes around the inflation rate by adjusting interest rates to heat up or cool down the economy.

When the Fed announces an increase in interest rates, it cues sell orders on Wall Street, and stock prices go down. When the rate stays the same or goes down, stocks rise.

Foreign Markets

The Dow, NASDAQ, and S&P indexes are significant global market drivers. But sometimes, it works the other way.

The Chinese economy has a big pull worldwide. Plus, western European indexes, such as the DAX in Germany and Great Britain’s FTSE, can take US stocks with them.  

Commodity Prices

Commodities such as oil or gold often work in tandem with the market. Higher oil prices may help stocks such as Exxon or BP but hurt other sectors that rely on fuel to supply goods.

Gold is often a shelter for investors when the stock market slumps. And, with its scarcity on the planet these days, even fresh water is a commodity.


Generally, the economy does what it does, no matter who is in office. But there are instances when political factors can sway the stock market because politicians control tax policy.

When Donald Trump was elected, the market was immediately bullish since the thought was that taxes on big businesses would go down. 

Buyer Confidence

Another factor that involves perception is investors’ confidence about a stock or sector. The Consumer Confidence Index gauges how people feel about the economy.

Science and technology have been popular for a couple of decades because people see innovation and progress around the corner.

Tracking Your Stocks Through Market Swings Is Vital

Knowing how your stocks perform compared to the market is crucial, so keeping up with your investments is a sound strategy. A diverse portfolio should follow trends in the market, but individual stocks may fare better or worse.

It is good to track individual stocks regularly to see how they do vs. market trends in the long and short run. But remember that a single business reacts more to internal factors and performance in its sector.

Moving Stocks Are Inevitable

Yes, the market reacts to more important things than you and your investments, and your stocks may reflect the reaction. Don’t lose sleep because the market swoons, or bring out the champagne when it charges.

Think percentages. Even a 10 percent dip may represent nothing more than a correction to an overvalued market. As a long-term investor, you should think further into the future than a daily blip or monthly trend. You should have a plan that covers five years or more and stick to that plan.

Sure, you can boot a stock that tanks or add one that shows promise. You can keep a close watch on your entire portfolio you have and put potential winners on your watchlist all in one place. That’s what StockMarketEye’s monitoring tools are about.

Webster Lupton Avatar
Webster Lupton Webster Lupton is a former newspaper writer, editor, and author with experience in trading stocks and general investments. He likes sports, the outdoors, and bird-watching.