How the News Affects Stock Prices

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When it comes to making a decision about whether or not you want to buy or sell a stock, there are many things you have to pay attention to: The state of the economy, the particular sector of the stock, and the news. 

Indeed, news that directly or indirectly affects a company can absolutely impact the stock of that company. Here’s how.

What is the stock market?

The stock market is the place where stocks – or small slivers of ownership in a company – can be purchased or sold. The price of a stock will rise and fall based on the perceived value of a particular stock. As a company does better, a stock’s price will rise, and as it does worse, the price will fall. 

Stocks can be bought or sold on any number of websites or apps, but if you want to do so, you have to make sure you are paying attention to multiple variables when making your stock purchasing and sales decisions.

How does the news affect stocks?

News affects stocks in many ways. If the news is good for a company – like positive quarterly reports – it can boost their price. Of course, the reverse is true as well. Furthermore, broad economic news may make people more or less willing to buy a stock, which speaks to the importance of signing up for stock alerts

Depending on the current state of the economy, the news may put more or fewer people into the stock market. Furthermore, news of foreign conflicts or booming financial sectors may force more or fewer people to become interested in a stock, thus altering its price.

It also may impact a stock’s implied volatility. According to the experts at tastytrade, implied volatility, or IV stock, is a percentage. It “is determined by the current price of options contracts on a particular stock or future. It is represented as a percentage that indicates the annualized expected one standard deviation range for the stock based on the option prices.”

This means that news events can increase or decrease a stock’s implied volatility, depending on the type of news. 

What could you do when investing in the stock market?

If you are investing in the stock market, you’ll have to keep track of the news that may impact your portfolio and use that information to continually reevaluate your stock approach. This may mean:

  • Monitoring financial news publications to track the general market
  • Setting a Google alert for the stock in question and watching what news appears about it
  • Tracking how the stock is doing by monitoring social media chatter
  • Keeping an eye on the stock’s page on any number of websites or apps that are engaged in this area

More than anything else, buying and selling stocks requires constant vigilance. You’ll have to pay attention to a variety of areas and multiple news sources, as well as the implied volatility of a stock, in order to make sure that your investments are performing the way that you want them to. If you want to be an active trader, you can’t just “set and forget” your investments.

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Editorial Disclaimer: The editorial content on this page is not provided by any of the companies mentioned and has not been endorsed by any of these entities. Opinions expressed here are author's alone

The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur.

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