Stock prices fluctuate on supply and demand. Small trades have very little impact on prices, but large transactions, or “market impact,” have a major effect. A large purchase will cause the price to go up, and a large sell order will drive it down. The latter is the most common way to crash the stock market. The flash crash that happened a few years ago was the result of a large sell order.
The market is regulated by government agencies. The Federal Reserve and various state regulators oversee the activity of the market. These institutions influence interest rates, liquidity, and other aspects of the economy. The stock market is regulated by the federal government, which is responsible for overseeing the stock market and promoting a fair exchange of company ownership. Many times, the government is in charge of regulating the market. For example, it sets the price at which securities can be bought and sold by investors.
The price of stocks is influenced by investor psychology. There are multiple reasons people buy and sell stocks, and these emotions play a big role in the decisions they make. The Dow Jones, for example, can fall by seven hundred points, resulting in more bearish sentiment. Also, because investors are not as rational as they think, the stock market media machine must constantly be fed with fear in order to keep the prices up. Therefore, the talking heads on business stations like CNBC are prone to inflating this fear and uncertainty, which is counterproductive for rational investment.