Why does bad news from one company affect the whole market?

Question

It appears to me that if one large company reports a bad quarter the whole market takes a dive. Why is that? There must be thousands of company that are public, but if one has bad news it affects the whole lot. Anyone know why?

Answer 1

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Answer 2

It is cuz large businesses have business all over the places...If it's in the index like dow jones, it will effect largely to the index portion....so people will view that the market is down at the moment. It is not necessarily bad news would take down the whole mkt...it depends on the current sentiment of the mkt...if it is bearish mkt...bad news tends to drive mkt down bigger, if it is in bull mkt time...bad news tends to have no effect or just temporarily.

Answer 3

Because large companies have departments/divisions of people trying to make positive results. Most of these divisions are spread across slightly differnt market segments.  When they fail/succeed it is seen as a condition of general business. The larger the company the more expressive of the economy (business conditions as a whole).  

It takes a lot more energy and effort  to move a Suburban than it does to move a Civic.  Does not matter which way forward, or backward.

Answer 4

Because most investors are sheep and are scared of losing their money. Some people get scared because their stock is down. Others see people selling so they sell too. The sector starts going down so people get scared and start selling their stock, and more people see people selling and follow them.