Stock prices change everyday by market forces. By this we mean that share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.

Understanding supply and demand is easy. What is difficult to comprehend is what makes people like a particular stock and dislike another stock. This comes down to figuring out what news is positive for a company and what news is negative. There are many answers to this problem and just about any investor you ask has their own ideas and strategies.

Company News
When a company releases news about a new product line or management change, be it good or bad. If it’s a positive reaction, the companys stock price will rise. If it’s bad, the stock price goes down.

Without question the most important factor that affects a company’s value, and therefore its stock price, is its earnings. Earnings are the profit a company makes, and in the long run no company can survive without them. If a company’s earnings are better than expected, its stock price increases. But if a company’s results are worse than expected, its stock price will fall. Simple as that.

Mergers and Acquisitions
Those mergers and acquisitions affect companies’ stock prices too because they permit companies to move into new markets or to maintain dominance in their current market. Market share translates to dollars, which in turn affects stock price and therefore a company’s bottom line.

Organization Restructure
Publicly traded companies seek to grow and gain market share, and they do it by consistently increasing earnings and revenue. How does a company increase earnings and revenue? Quality labor is a good place to start. Without quality management, no company can succeed over the long term; so when a CEO steps down, some might see this as being negative (stock prices fall), while others might accept the restructure as a much-needed change going forward (stock prices rise).

Analyst Upgrades and Downgrades
Everyday senior analysts from various firms upgrade or downgrade securities. Sometimes the more well known analysts do it publicly to dramatic effect. News of a strong buy rating with a 12-month price target can potentially send a stock’s price through the roof. Of course, the opposite is also true. Strong downgrades can send stock prices plummeting.

In these instances, buyers and sellers should be cautious; such ratings are nothing more than one analyst’s personal opinion. Ultimately, the real reason a stock goes up and down in price is the number of buyers and sellers, which relates back to the law of supply and demand.