How the Stock Market Works

When a company like Apple wants to raise money, one option is to sell small pieces of itself to the public. Those pieces are shares — and owning a share means you own a tiny fraction of the actual business. Not a coupon, not a bet. Ownership.

If Apple has 15 billion shares outstanding and is worth $3 trillion in total, each share represents roughly $200 of the company's value. If Apple earns more, builds more products people want, and becomes worth $4 trillion, those shares become worth more. If Apple makes bad decisions and loses ground, they become worth less.

Stock exchanges are organized markets where buyers and sellers find each other. The two biggest ones in the US are the New York Stock Exchange (NYSE) and the Nasdaq. They're open Monday through Friday, 9:30 AM to 4:00 PM Eastern.

Nobody actually walks onto a trading floor anymore — everything routes through apps and brokerages electronically. When you tap 'buy' on Robinhood or Fidelity, an order goes out and gets matched with someone willing to sell at that price.

Prices move because of supply and demand — more people wanting to buy a stock pushes the price up, more people wanting to sell pushes it down. The interesting part is what drives those decisions.

Stock prices don't just reflect what a company is doing right now. They reflect what investors collectively think it will do in the future. This is why a company can announce record profits and still see its stock fall — if everyone expected even bigger profits, 'record' is a disappointment.

• Earnings reports — actual profits vs what analysts expected
• Forward guidance — what the company itself says about its future
• Interest rates — when rates rise, future profits are worth less in today's dollars, so stocks often fall
• Macro news — inflation data, unemployment numbers, GDP figures all affect investor confidence
• Sentiment — sometimes markets move on vibes. This is frustrating but true.

A bull market is a sustained rise in prices — generally defined as a 20% gain from a recent low. A bear market is a sustained decline — defined as a 20% drop from a recent high. The names come from how the animals attack: bulls thrust upward with their horns, bears swipe downward with their paws.

Bear markets are normal. They've happened roughly every 3–5 years throughout modern financial history. The 2020 COVID crash was a bear market. The 2008 financial crisis was a bear market. Every single one of them eventually ended.

When the news says 'the market was up 1.2% today,' they almost always mean the S&P 500 — an index of the 500 largest US companies. It includes Apple, Microsoft, Amazon, Nvidia, Berkshire Hathaway, and 495 others, weighted by their size.

There's also the Dow Jones (just 30 companies, older and less representative) and the Nasdaq Composite (skews heavily toward tech). The S&P 500 is the one most investors and institutions actually use as their benchmark.