News has a significant effect on the stock prices, markets, national economy, and the decisions investors make to sell, buy, or hold stocks. A smart investor pays close attention to news media reports relating to global economies, politics, company stocks, exchanges rates, interest rates, and financial reporting. He or she needs this information, along with other investment tools, to develop a strategy that safeguards their invested capital.
Consider an investor who invested tens of thousands of dollars in the NASDAQ: FTR (Frontier Communications) stock, before NASDAQ delisted the company on May 11th, 2020. As of April 23rd, 2020, the stock had a share price at $0.26, according to MarketBeat.com. One Wall Street analyst predicted the average 12-month price target at $0.90, an increase of 246.15 percent. The analyst’s consensus rating was to sell the stock.
The investors who purchased shares of the stock most likely sold their shares after they read or listened to the news about the financial conditions of the company before its delisting. Frontier Communications is now trading on the OTC Bulletin Board or Pink Sheets Market, as of April 24th, 2020, under the FTRCQ symbol. On April 9th, 2021, the stock price per share is $0.2848, according to NASDAQ. Some investors may have the company on their watchlist to monitor its share price fluctuations.
Five Events That Make News Headlines and Possibly Affect Stock Prices and Markets
- Political Agreements and the Passing of Bills
- World Events
- New Developments, Products, and Services
- Exchange Rates
- Release of Company Financial Reports
The announcement of political agreements and the passing of bills signed by the U.S. President impact the stock markets and prices. In early March 2020, Congress agreed on a stimulus package that was approximately $80 billion for relief, after coronavirus devastated the nation. U.S. stocks started rising soon after the news hit the media, with S&P 500 up at 4.2 percent, Dow Jones Industrial Index up 4.5 percent, and NASDAQ was up by 3.9 percent.
When Former President Donald Trump signed the $2 trillion economic stimulus package into law on March 24th, stock prices increased even higher. It passed as the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) with $300 billion going to Americans as cash stimulus payments. The remaining of money went towards unemployment benefits, forgivable small business loans, corporate loans, and state/local governments. The political agreement and the actual passing of the bill affected the national economy and stock prices.
World events, including wars, natural disasters, and terrorism, that make the headlines in the news, can directly and indirectly impact stock prices and markets. When the U.S. Federal Reserve makes adjustments to interest rates, it can influence the stock market. For example, if there is an increase in the interest rates, many investors decide to sell or trade their high-risk stocks for government-backed securities, such as bonds.
When companies release good news about new developments, products, and services, some investors increase their stakes to cause the stock prices to rise. A merger, acquisition, or the launch of a new product or service can affect the stock markets, as well. This is good news for a smart investor wanting to invest in company stocks in business, health, and technology.
The bad news about company stock, such as accusations against executives committing fraud, may influence a smart investor to sell their shares. These are two examples of how the news can affect the stock market that smart investors look for, before they decide to sell, hold, or purchase a stock.
Exchange rates change and increase and decrease the cost of conducting business in a country. Foreign currency rates have a direct effect on the value and price of a stock in other countries. What affects short-term movements in unpredictable exchange rates are the news, events, and the trading of futures.
The release of company financial reports with positive net income and profits affects stock prices that analysts may give consensus ratings to hold and buy. A smart investor will consider this information and purchase additional stock shares and hold their existing shares.
A smart investor stays current on news relating to the economy, company stocks, interest rates, financial reports, and national/global events. All the events listed above are significant news to investors and traders trading on stock exchanges and OTC markets. They use this information to make strategic decisions about which stocks to buy, hold, or sell.