What makes a Company's Stock prices go up or down?
There are many things that can make a company's share price go up or down. Generally, over the long term, the more consistently profitable a company is the more its share price will go up. However, there are times when a company may not be making any profits yet but its share price still goes up. This can be due to forecasts that the company will start making profits in the near future. Sometimes a company may report increased profits from the previous year but makes less than what the market was expecting it to make. This can cause its share price to fall, as the market is disappointed in the results. In the shorter term greed, fear and speculation can make a company's share price move irrationally. When you think the share price should be going up it suddenly falls, and Vis-versa. When interest rates are low, companies with higher dividend yields (compared to bank account interest rates) become high in demand and their shares generally go up in price. As the share price goes up the dividend yield will be reduced unless the company continues to increase the dividend it distributes to shareholders. When interest rates start to rise these companies become less favourable as they are seen as higher risk comparable to similar returns from having one's money in the safety of the bank. This can cause the share prices to fall. These are just some of the reasons that make a company's share price move up or down. As humans are an irrational bunch often ruled by emotions, sometimes the reasons share prices move in a particular direction can be quite confusing, but that is the nature of the financial markets. Here are some significant factors affect the company stock price performance: Usually, profitability is known to the public through the financial statements; it won't be 100% accurate and people would also trade the stock with the price not matching to the true value of the firm. Still there are dozens of other various reasons exist. People are just not behaving as rational as what the textbook describes when they are trading and investing. "It's been said before, but to repeat succinctly, a company's current share price is no more or less than what ""the market"" thinks that share is worth, as measured by the price at which the shares are being bought and sold. As such, a lot of things can affect that price, some of them material, others ethereal. A common reason to own stock is to share the profits of the company; by owning 1 share out of 1 million shares outstanding, you are entitled to 1/1000000 of that company's quarterly profits (if any). These are paid out as dividends. Two key measurements are based on these dividend payments; the first is ""earnings per share"", which is the company's stated quarterly profits, divided by outstanding shares, with the second being the ""price-earnings ratio"" which is the current price of the stock divided by its EPS. Your expected ""yield"" on this stock is more or less the inverse of this number; if a company has a P/E ratio of 20, then all things being equal, if you invest $100 in this stock you can expect a return of $5, or 5% (1/20). As such, changes in the expected earnings per share can cause the share price to rise or fall to maintain a P/E ratio that the pool of buyers are willing to tolerate. News that a company might miss its profit expectations, due to a decrease in consumer demand, an increase in raw materials costs, labor, financing, or any of a multitude of things that industry analysts watch, can cause the stock price to drop sharply as people look for better investments with higher yields. However, a large P/E ratio is not necessarily a bad thing, especially for a large stable company. That stability means the company is better able to weather economic problems, and thus it is a lower risk. Now, not all companies issue dividends. Apple is probably the most well-known example. The company simply retains all its earnings to reinvest in itself. This is typically the strategy of a smaller start-up; whether they're making good money or not, they typically want to keep what they make so they can keep growing, and the shareholders are usually fine with that. Why? Well, because there's more than one way to value a company, and more than one way to look at a stock. Owning one share of a stock can be seen quite literally as owning a share of that company. The share can then be valued as a fraction of the company's total assets.  Sounds simple, but it isn't, because not every asset the company owns has a line in the financial statements. A company's brand name, for instance, has no tangible value, and yet it is probably the most valuable single thing Apple owns. Similarly, intellectual property doesn't have a ""book value"" on a company's balance sheet, but again, these are huge contributors to the success and profitability of a company like Apple; the company is viewed as a center of innovation, and if it were not doing any innovating, it would very quickly be seen as a middleman for some other company's ideas and products. A company can't sustain that position for long even if it's raking in the money in the meantime. Overall, the value of a company is generally a combination of these two things; by owning a portion of stock, you own a piece of the company's assets, and also claim a piece of their profits. A large company with a lot of material assets and very little debt can be highly valued based solely on the sum of its parts, even if profits are lagging. Conversely, a company more or less operating out of a storage unit can have a patent on the cure for cancer, and be shoveling money into their coffers with bulldozers." "I always liked the answer that in the short term, the market is a voting machine and in the long term the market is a weighing machine. People can ""vote"" a stock up or down in the short term.   In the long term, typically, the intrinsic value of a company will be reflected in the price. It's a rule of thumb, not perfect, but it is generally true. I think it's from an old investing book that talks about ""Mr. Market"".   Maybe it's from one of Warren Buffet's annual letters.    Anyone know? :)"
The company gets it worth from how well it performs. For example if you buy company A for $50 a share and it beats its   expected earnings, its price will raise and lets say after a year or   two it can be worth around $70 or maybe more.This is where you can   sell it and make more money than dividends. Typically a private company is hit by demand supply issues and cost of inputs. In effect at times the cost of input may go up, it cannot raise the prices, because this will reduce demand. However certain public sectors companies, typically in Oil & Engery segements the services are offered by Public sector companies, and the price they charge is governed by Regulatory authorities. In essence the PG&E, the agreement for price to customers would be calculated as cost of inputs to PG&E, Plus Expenses Plus 11.35% Profit. Thus the regulated price itself governs that the company makes atleast 11.35% profit year on year. Does this mean that the shares are good buy?  Just to give an example, say the price was $100 at face value, So essentially by year end logically you would have made 111.35/-. Assuming the company did not pay dividend ... Now lets say you began trading this share, there would be quite a few people who would say I am ready to pay $200 and even if I get 11.35 [on 200] it still means I have got ~6% return. Someone may be ready to pay $400, it still gives ~3% ... So in short the price of the stock would keep changing depending how the market percieves the value that a company would return. If the markets are down or the sentiments are down on energy sectors, the prices would go down.  So investing in PG&E is not a sure shot way of making money. For actual returns over the years see the graph at http://www.pgecorp.com/investors/financial_reports/annual_report_proxy_statement/ar_html/2011/index.htm#CS Should go up because of a company is doing better than the market previously expected it to do, the implication is that it's undervalued at the current price and you buy now you're getting it for less than what it's worth.   If Trump was wrong, then the stock would trade up for a bit before ultimately finishing up where it started when the market realises there's nothing in what he said. Aside from the market implications Victor and JB King mention, another possible reason is the dividends they pay. Usually, the dividends a company pays are dependent on the profit the company made. if a company makes less profit, the dividends turn out smaller. This might incite unrest among the shareholders, because this means that they get paid less dividends, which makes that share more likely to be sold, and thus for the price to fall. "What does ""points"" mean In any stock market, there are certain stocks that go up and certain stocks that go down. Hence if we want to find the generic health of stock market, i.e. on an average is it going up or down, we have no means to find out.  A practise that has evolved over the years is take a set of companies and find if on average they have gone up or gone down. In very simple terms say in 1970 I take the Market Capitalization of a set of 50 companies, lets say its value is ""X"". I would now call this index as value of 100. Now after a month if the Market Capitalization is 2X, the index value would be 200. After another month if the Market Capitalization come down to 1.5X, then index value would be 150. So essentially now one is able to get the general trend more easily. S&P is an index of Select 500 companies based on various parameters. So in isolation 2000 does not mean anything. However as a comparison it does give quite a bit of insight. Note there are various adjustments made to factor, i.e. certain companies go bankrupt or are not doing well are removed from Index, share splits, mergers, etc. This ensure that the Index is neutral and does not show unwarranted spikes." "The price of a company's stock at any given moment is established by a ratio of buyers to sellers.  When the sellers outnumber the buyers at a given price, the stock price drops until there are enough people willing to buy the stock to balance the equation again.  When there are more people wanting to purchase a stock at a given price than people willing to sell it, the stock price rises until there are enough sellers to balance things again.  So given this, it's easy to see that a very large fund (or collection of very large funds) buying or selling could drive the price of a stock in one direction or another (because the sheer number of shares they trade can tip the balance one way or another).   What's important to keep in mind though is that the ratio of buyers to sellers at any given moment is determined by ""market sentiment"" and speculation.  People selling a stock think the price is going down, and people buying it think it's going up; and these beliefs are strongly influenced by news coverage and available information relating to the company.  So in the case of your company in the example that would be expected to triple in value in the next year; if everyone agreed that this was correct then the stock would triple almost instantly.  The only reason the stock doesn't reach this value instantly is that the market is split between people thinking this is going to happen and people who think it won't.   Over time, news coverage and new information will cause one side to appear more correct than the other and the balance will shift to drive the price up or down.  All this is to say that YES, large funds and their movements CAN influence a stock's trading value; BUT their movements are based upon the same news, information, analysis and sentiment as the rest of the market.  Meaning that the price of a stock is much more closely tied to news and available information than day to day trading volumes.  In short, buying good companies at good prices is just as ""good"" as it's ever been.   Also keep in mind that the fact that YOU can buy and sell stocks without having a huge impact on price is an ADVANTAGE that you have.  By slipping in or out at the right times in major market movements you can do things that a massive investment fund simply cannot." "As others have pointed out, there are often many factors that are contributing to a stock's movement other than the latest news.  In particular, the overall market sentiment and price movement very often is the primary driver in any stock's change on a given day.   But in this case, I'd say your anecdotal observation is correct: All else equal, announcements of layoffs tend to drive stock prices upwards. Here's why: To the public, layoffs are almost always a sign that a company is willing to do whatever is needed to fix an already known and serious problem. Mass layoffs are brutally hard decisions.  Even at companies that go through cycles of them pretty regularly, they're still painful every time.  There's a strong personal drain on the chain of executives that has to decide who loses their livelihood.  And even if you think most execs don't care (and I think you'd be wrong) it's still incredibly distracting.   The process takes many weeks, during which productivity plummets. And it's demoralizing to everyone when it happens. So companies very rarely do it until they think they have to.  By that point, they are likely struggling with some very publicly known problems - usually contracting (or negative) margins.   So, the market's view of the company at the time just before layoffs occur is almost always, ""this company has problems, but is unable or unwilling to solve them."".  Layoffs signal that both of those possibilities are incorrect.  They suggest that the company believes that layoffs will fix the problem, and that they're willing to make hard calls to do so. And that's why they usually drive prices up." Not directly. But companies benefit in various ways from a higher stock price. One way a high stock price can hurt a company is that many companies do share buybacks when the price is too high. Economically speaking, a company should only buy back shares when those shares are undervalued. But, management may have incentives to do buybacks at irrationally high prices. "I don't know why there is so much confusion on such a simple concept. The answer is very simple. A stock must eventually pay dividends or the whole stock market is just a cheap ponzi scheme. A company may temporarily decided to reinvest profits into R&D, company expansion, etc. but obviously if they promised to never pay dividends then you can never participate in the profits of the company and there is simply no intrinsic value to the stock. For all of you saying 'Yeah but the stock price will go up!', please people get a life. The only reason the price goes up is in anticipation of dividend yield otherwise WHY would the price go up?  ""But the company is worth more and the stock is worth more"" A stocks value is not set by the company but by people who buy and sell in the open market.  To think a stock's price can go up even if the company refuses to pay dividends is analogous to : Person A says ""Hey buy these paper clips for $10"". But those paper clips aren't worth that. ""It doesn't matter because some fool down the line will pay $15"". But why would they pay that? ""Because some fool after him will pay $20"" Ha Ha!" "Buying pressure is when there are more buy orders than sell orders outstanding.  Just because someone wants to buy a stock doesn't mean there's a seller ready to fill that order.  When there's buying pressure, stock prices rise.  When there's selling pressure, stock prices fall. There can be high volume where buying and selling are roughly equal, in which case share prices wouldn't move much. The market makers who actually fill buy and sell orders for stock will raise share prices in the face of buying pressure and lower them in the face of selling pressure.  That's because they get to keep the margin between what they bought shares from a seller for and what they can sell them to a new buyer for.  Here's an explanation from InvestorPlace.com about ""buying pressure"": Buying pressure can basically be defined as increasingly higher demand for a particular stock's shares. This demand for shares exceeds the supply and causes the price to rise. ... The strength or weakness of a stock determines how much buying or selling interest will be required to break support and resistance areas. I hope this helps!" "I understand you make money by buying low and selling high. You can also make money by buying high and selling higher, short selling high and buying back low, short selling low and buying back even lower. An important technique followed by many technical traders and investors is to alway trade with the trend - so if the shares are trending up you go long (buy to open and sell to close); if the shares are trending down you go short (sell to open and buy to close). ""But even if the stock price goes up, why are we guaranteed that there is some demand for it?""  There is never any guarantees in investing or trading. The only guarantee in life is death, but that's a different subject. There is always some demand for a share or else the share price would be zero or it would never sell, i.e zero liquidity. There are many reasons why there could be demand for a rising share price - fundamental analysis could indicated that the shares are valued much higher than the current price; technical analysis could indicate that the trend will continue; greed could get the better of peoples' emotion where they think all my freinds are making money from this stock so I should buy it too (just to name a few). ""After all, it's more expensive now."" What determines if a stock is expensive? As Joe mentioned, was Apple expensive at $100? People who bought it at $50 might think so, but people who bought at $600+ would think $100 is very cheap. On the other hand a penny stock may be expensive at $0.20. ""It would make sense if we can sell the stock back into the company for our share of the earnings, but why would other investors want it when the price has gone up?"" You don't sell your stocks back to the company for a share of the earnings (unless the company has a share-buy-back arrangement in place), you get a share of the earnings by getting the dividends the company distributes to shareholders. Other investor would want to buy the stock when the price has gone up because they think it will go up further and they can make some money out of it. Some of the reasons for this are explained above." It has got to do with market perceptions and expectation and the perceived future prospects of the company. Usually the expectation of a company's results are already priced into the share price, so if the results deviate from these expectations, the share price can move up or down respectfully. For example, many times a company's share price may be beaten down for increasing profits by 20% above the previous year when the expectation was that it would increase profits by 30%. Other times a company's share price may rise sharply for making a 20% loss when the expectation was that it would make a 30% loss. Then there is also a company's prospects for future growth and performance. A company may be heading into trouble, so even though they made a $100M profit this year, the outlook for the company may be bleak. This could cause the share price to drop accordingly. Conversely, a company may have made a loss of $100M but its is turning a corner after reducing costs and restructuring. This can be seen as a positive for the future causing the share price to rise. Also, a company making $100M in profits would not put that all into the bank. It may pay dividends with some, it may put some more towards growing the business, and it might keep some cash available in case cash-flows fluctuate during the year. When a stock price rises, the company's assets are worth more. This doesn't mean it gets more cash directly, but it can liquidate (= sell) some of its stocks for a higher return than before. Stock price is an indicator about the health of the company.  Increased profits (for example) will drive the stock price up; excessive debt (for example) will drive it down. The stock price has a profound effect on the company overall: for example, a declining share price will make it hard to secure credit, attract further investors, build partnerships, etc.  Also, employees are often holding options or in a stock purchase plan, so a declining share price can severely dampen morale. In an extreme case, if share prices plummet too far, the company can be pressured to reverse-split the shares, and (eventually) take the company private.  This recently happened to Playboy. Fiduciary They are obligated by the rules of the exchanges they are listed with. Furthermore, there is a strong chance that people running the company also have stock, so it personally benefits them to create higher prices. Finally, maybe they don't care about the prices directly, but by being a good company with a good product or service, they are desirable and that is expressed as a higher stock price.  Not every action is because it will raise the stock price, but because it is good for business which happens to make the stock more valuable.