Learn the stock market › Why does a stock move? › Lesson 5 of 9
Why do stocks move on earnings day?
How much a stock moves
The move counts up or down, without its sign. Of 30 large Stockholm companies, 29 moved more on earnings day than on a normal day, a median of 3.5 times as much. The table shows the three that move most and the three that move least.
| Company | Earnings day, median | Normal day, median |
|---|---|---|
| Ericsson | 7.9% | 0.8% |
| Evolution | 6.1% | 1.0% |
| Nibe | 5.8% | 1.5% |
| Swedbank | 1.3% | 0.8% |
| Industrivärden | 1.1% | 0.8% |
| Investor | 0.6% | 0.7% |
Ericsson moves most, a median of 7.9%. Investor moves least, 0.6%. The table counts the latest reports. Every report since 2015 is in the study on earnings day, with US companies.
It looks the same elsewhere. Nvidia, which many people follow, has a median move of 5.5% on earnings day against 1.8% on a normal day.
Why the move is large
Between reports the market learns quite little. The report brings sales, profit, orders and often what management expects next. All of it reaches the price within minutes.
Why a good report can lower the price
The price already holds what the market expected. Profit that grows but falls short of expectations can lower it. Weak profit that was less weak than feared can lift it. What management says about the future often weighs more than the last quarter's numbers. How often a stock falls despite beating the estimate is counted in a lesson in Read an earnings report.
This is not only about reports. Anything that changes expectations works the same way, see the first lesson.
Test yourself
A company's profit grows 20%, but its stock falls 6%. What is the most likely explanation?
See a real example: Why did Ericsson move?