Why do many stocks sometimes go up or down simultaneosly?



I get why a price of an individual stock goes up or down.

What I am trying to understand and I didn’t find on sub either is why some days a whole market can go wildly up or down at the same exact moment.

Is it just many people investing in a particular sector at once or some other factors?

Thank you in advance 🙂

In: Economics

Certain events affect every company. For example a general strike would result in all companies losing however many days’ production and therefore a certain amount of revenue and so value.

Also the fortunes of companies are tied to other companies. If the price of steel goes up then the profitability of selling steel widgets goes down. So people who sell steel widgets lose out. But so do all their suppliers, and all their customers, and maybe banks that have lent money to them, and so on.

Especially in situations where it is unclear what the long term affect will be (e.g the first weeks of a pandemic) it is reasonable to bet that every company might lose out. And that is what buying and selling stocks is; betting on the future value of companies.

The whole market can go up and down based on impacts of financial confidence. For example, periodic reports of unemployment. When unemployment is low, investors fear all companies will stall, because no one is making money to spend money. No one spending money means companies lose money and can’t hire people. It can be a viscous cycle.

Other factors are things like inflation fears, federal initiatives like rate hikes, tax breaks, stimulus plans and so on.

For any given company, prices go up and down based on things that happen to that company or might effect that company. If your company has cows that make milk which you sell, then if your cows die your value would probably drop and if people buy more milk for a holiday then your value might raise. Most big companies aren’t quite that simple but the same basic logic applies.

When the whole market moves at once then you would expect that something had affected every company (or at least every major company). This can happen with things like tax laws being passed, natural disasters and wars influencing what consumers will buy, more or less money being printed or loaned by a government, and even certain financial results like when a bubble bursts and people can’t pay debts.

Many factors happens. The usual case because trading between countries. Others from news influence, for example Pfizer success making vaccine, thus Pfizer stock gone up. Or some government policy (example The Feds)

Social media influence can affect market too. Like GME, that caused by subreddit that urges people buy the stock. Or Elon musk that urges sell bitcoin.

Companies’ performance are tied to individual performance, but also to the overall economy. Factors that could impact all/many companies could cause widespread downturn, like widespread labor shortages causing wages to rise (and cutting into profits); inflation fears; a rise in interest rates, making it more costly for business to borrow and customers to finance purchases; uncertainty in market (see initial COVID plunge).