Explore BrainMass

Economic analysis of Kellogg earnings

Kellogg Earnings Surpass Expectations- By James Prichard, AP Business Writer

GRAND RAPIDS, Mich. - Kellogg Co. on Monday said its earning rose 17.3 percent in the second quarter on strong company wide sales growth, beating Wall's Street's expectations. What happened to their stock after the announcement? Why?

Solution Preview

Hi There,
<br>According to the article, on the New York Stock Exchange, Kellogg shares were up 77 cents to close at $34.77. The reason for this is that the company performed better than people expected, thus the increased interest in the company drove the demand up for the stock. The result of the increased demand is a quick rise in the stock price.
<br>Stock prices move up and down every minute due to fluctuations in supply and demand. If more people want to buy a particular stock, its market price will increase. Conversely, if more people want to sell a stock, its price will fall. This relationship between supply and demand is tied into the type of news reports that are issued at any particular moment.
<br>Negative news will normally cause individuals to sell stocks. Bad earnings reports, poor guidance, economic and political uncertainty, and unexpected unfortunate occurrences will translate to selling pressure and a decrease in stock price.
<br>Positive news will normally cause individuals to buy stocks. Good earnings reports, increased guidance, new products, and good economic and political indicators translate into buying pressure and an increase in stock price.
<br>But, it's not easy, if at all possible, to capitalize on news. The effect new information has on a stock is dependant upon the extent to which it is unexpected. This is because the market is always building future expectations into prices. For example, if a company comes out with high unexpected profits, the stock's price will ...

Solution Summary

This problem involves the fundamentals of Economic analysis