Let's look at what actually moves a stock or the broader equity markets.

Higher or lower day by day, equity prices respond to a mix of factors.

Some are macro driven, others companies specific, but most fall into four categories, risk on or off sentiments, earnings and corporate activity.

Let's have a look at each of these in turn.

Firstly, risk on or risk off.

This is the broad market's mood.

When investors are optimistic about growth, they may choose to invest into riskier assets like equities.

That's risk on when fear dominates.

Driven by weak data, rising rates or geopolitical tension, investors may shift to safer assets like bonds or cash that's risk off.

Economic news can flip this mood directly by changing the profitability outlook for companies generally or indirectly, such as via interest rates.

Since higher rates increase the cost of capital for companies, and therefore the discount rates used to value companies, which tends to lead to lower valuations.

Next sentiment, while risk on or off describes whether investors want to fundamentally take on or avoid risk.

Sentiment describes how they feel within the equity markets once they're already in.

Even without new data.

Changes in investor mood and asset allocation can move markets.

If large investors shift weight from bonds into equities, those flows support prices within equities.

Sentiment changes across sectors, tech and AI may lead one month energy or ESG.

The next. This can shift independently or in anticipation of macro news.

Earnings over the medium to long run share prices generally track earnings around companies results announcements.

Volatility tends to jump as investors update their models based on whether companies have beaten or missed their expected earnings and management guidance for the future prospects of the company.

In other words, how forward expectations have changed Versus what the market had already priced in.

Lastly, corporate activity takeovers, mergers and buybacks can move prices sharply with mergers and acquisitions or m and a activity.

The target company stock price typically jumps towards, but often just below the offer share price until the deal closes.

Reflecting the risk that the deal might not reach completion, the reaction of the acquirer's share price depends on whether the market believes the deal is good for the acquirer.

Based on factors such as the purchase price, expected synergies, and how the acquisition is being financed.

Buybacks and dividend increases tend to support stock prices by signaling confidence and returning cash to investors, provided they're sustainable and not fully anticipated, and the mix of debt in the company's capital structure doesn't rise to uncomfortable levels.