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The stock market is not any different than any other marketplace where buyers and sellers gather to exchange goods or services. Even with all the media attention the stock market draws, the driving force behind stock price movement is simple supply and demand. If there are more buyers of stock than sellers, the price will rise. If there are more sellers of stock than buyers, the price will drop fall.

While there are many theories on what factors affect people’s perceptions of stock value, no one theory can cover it all. Here are some generally accepted forces that affect stock prices.

Each quarter of the year, companies give a report card known, or earnings report, known as the 10Q or 10K. This report details how profitable the company was for the previous period. It is widely believed that in the long run, a company’s stock price will follow its earnings. So if a company continues to earn more money, the stock price will usually increase. Likewise, if the company shows signs that earnings are declining or will decline, the stock price usually drops.

Market Sentiment

There are many indicators that determine how well we as a country are doing economically. In fact, there are too many indicators to list for the purpose of this article but indicators that reflect unemployment, the inflation rate. housing prices, along with how optimistic or pessimistic consumers are about the economy all factor into people’s decisions as whether to buy or sell stocks. Keep in mind there are many ways to interpret these indicators and often times these indicators will conflict with one another as to which direction the economy is heading. The data the indicators show in and of themselves is not as important to the direction of stock market or stock prices as is the interpretation of the data. As an example, unemployment might be high, which you might think is bad for the economy, but it could be interpreted that with high unemployment, interest rates may remain low, which is good for the stock market.

Political Uncertainty

People in general do not like uncertainty. The stock market is made up of people so it is sufficient to say that the stock market can become very erratic in times of political uncertainty. Whenever there is any sort of political unrest, stock prices tend to fluctuate widely.

If I were to try to tackle all the factors that account for movement in stock prices, this would become a book and not an article, but the factors above should make for a good basis.

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