Stock markets quickly react to earnings and policy changes

Recent research from the University of California San Diego reveals how quickly stock markets react to earnings announcements. This study highlights the impact of such news on stock prices and the overall market. In one example, Illumina reported disappointing earnings on February 11, causing its stock to drop 5.5% instantly. Following this, Agilent Technologies, a related company, saw its stock price fall by 11.80% over the following week. This shows that bad news from one company can negatively affect others in the same sector. On the other hand, companies like Apple can boost the market when they report better-than-expected earnings. A strong performance from Apple signals that consumers have more money to spend, which can help lift the whole market. Similar effects have been seen with earnings from Nvidia, whose announcements can sometimes influence the market as much as important economic news. Most companies release earnings after trading hours, which typically sees lower trading volumes. This can make it hard to notice price changes because there is less activity. To address this, researchers created a new method to better detect price jumps in the after-hours market. They found that stock markets have become more efficient, making it tough for traders to find good opportunities soon after earnings are announced. Major brokerage firms are using high-frequency trading techniques, which rely on advanced computer programs to execute trades nearly instantly. Some firms are even exploring quantum computing and AI to improve their trading strategies. Researchers concluded that for the biggest stocks, prices can change within milliseconds after earnings news. By the time human traders attempt to react, it is often too late. This means individual investors might struggle to keep up with rapid market moves.