How does the stock market work? and Stock stampede

How does the stock market work?

Okay, so i know that america's stock market is pretty much screwed. But, how did that happen exactly? What causes the stock market to go so down, or to go up?

Thanks in advance(:
I forgot to mention this, but what do the points in the stock market mean? For example, right now, the Dow Jones has about 6872.89 points. What does that mean?


Stock best answer:

Answer by Mr. Pheterson
Each stock is a piece of a company. So if you own a stock, you actually own a part of that company. The value of the company is then determined by how much people are willing to pay for 1 share of the stock.

This is where it starts to get tricky.

Since the value is based on what people are willing to pay, this can change on a whim. Say a company has a bad day -- their product has a recall -- people are then not willing to pay as much for 1 share of the stock and the company is worth less.

Other factors sway people's minds, but that's pretty much the root of what's going on. Things changed people's minds about these companies, then people weren't willing to pay as much for a share, and thus the market falls.

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Nykredit Copenhagen Marathon 2012

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