• Nov 2, 2013

Stock Market Movers & Shakers

By  Maddie Gaw

In Ayad Akhtar’s The Invisible Hand, captive American banker Nick Bright must teach his captor Bashir the ins and outs of stock market trading in order to raise the ransom his country is not willing to pay. “Trading’s about having an edge,” he tells Bashir, “understanding something that others haven’t figured out yet.”

Lots of things can affect the stock market, whether it’s political instability due to acts of terrorism, as you will see in The Invisible Hand, natural disasters, or simply rumors. Here are a few examples of how outside forces can drive the market—and why it’s important for someone like Nick Bright to stay on top of these trends.

Factors affecting the market value of a specific company’s stock generally fall into two categories: internal and external. Internal factors—those coming from within the company—can include the hiring and firing of an important leader, the status of a new product, or allegations of fraud or misconduct.

External factors include world events—political or military crises, natural disasters—as well as rumors and hype that originate outside of the company. Journalists and others who hype certain products can drive up a company’s stock—and on the flip side, negative reports, whether they are true or false, can drive that same stock down.

Case #1: Steve Jobs’ heart attack rumor

In 2008, someone posted a story to CNN’s iReport—the news network’s citizen journalism outlet—that Steve Jobs had suffered a major heart attack and was currently in the hospital. That morning, within the first hour of trading, the Apple stock lost 10% of its value—roughly $4.8 billion dollars. For comparison, following Steve Jobs’ death in 2011, Apple stock only went down 0.2%—but by then he had officially stepped down as CEO and his health issues were widely known. 

Case #2: November 2015 Paris attacks

The Islamic State of Iraq and the Levant (ISIL) took credit for the devastating terrorist attacks in Paris in November 2015. Following strong statements from French President Francois Hollande and U.S. President Barack Obama about the commitment to defeating ISIL, the stocks of defense companies who make military weapons and vehicles—like Lockheed Martin and Raytheon—rose by about 4%. AeroVironment, the Pentagon’s top provider of small drones, jumped up 6%.

Case #3: BP Deepwater Horizon oil spill

In April 2010, Deepwater Horizon—an offshore drilling rig owned and operated by oil and gas company BP—exploded and eventually sank, causing the largest offshore oil spill in U.S. history. BP’s stock fell about 22% in the days after the spill—roughly $40 billion dollars—and continued to fall in the coming months. Intense press coverage of the sheer scope of the resulting environmental damage certainly played a role in just how dramatically BP’s stock fell, regardless of their response to the situation.