3. Industry News
News updates regarding a specific industry can sometimes have a domino effect on many companies in the same category. This makes it essential for traders to review industry news headlines regularly – for example, by reading up on news in technology if one has invested in Microsoft shares.
One instance of news affecting share value is the change in CEO of a large corporation. This could either falter or instil confidence in investors and as a result cause market movement of the stocks for that corporation.
Supply and Demand
Stocks are subject to laws of supply and demand. When more stocks are available than are in demand, each share of a company is worth less. So if an institution or wealthy individual sells a large amount of its shares in a particular company, that company’s stock value may see a subsequent decrease – in the short term at least. However, if a company announces that it plans to buy back shares, this indicates that there will be fewer shares available for general purchase in the near future, and may therefore result in that company’s stock price rising.
News of a shortage or high supply of a certain commodity also has the ability to affect many companies within its sector. For example, if there is a shortage of copper, many mining companies may be affected, especially those mining copper, causing subsequent movement in share values.
Occasionally, a piece of news about one company may go on to affect many other companies in the same industry. For example, in 2014, Tesco’s share price fell significantly, but a great deal of its direct competitors in the UK also saw the value of their stock drop. This was partly due to a widespread unease that investors felt about the UK supermarket industry at the time; Tesco’s actions and the subsequent fall-out emphasised the issues within the industry, and brought it to light in the minds of investors.
Other headlines that can shape a firm’s stock price can include company announcements of upcoming changes in strategy, mergers and acquisition rumours and economic news concerning interest rates and inflation.