What Does Market Is Up Mean?
The phrase market is up means the stock, bond, or commodity market, or an index representing them, currently trades higher than it did at some specific point in the past. Most of the time, financial media and individual investors refer to the stock market, saying it is up or down, they are comparing it to the previous trading session. Often a follow-up usage of the term will coincide with a reference to the performance during the previous week, month, quarter, or year to date.
- This is a common phrase used when a given market closes higher than the day before.
- The opposite phrase is the market is down or the market is off.
- Markets usually trade higher when new information is disseminated.
What Moves Stock Prices?
Understanding the Phrase Market Is Up
When a given trading market (most frequently the U.S. Stock market) is being reported by financial media, this phrase will be used when, in comparison to the previous day's closing level, the reference price is higher. This could also refer to the previous week's closing level or even last year's closing level (year to date).
The opposite phrase is the market is down or, very commonly, the market is off by a given amount. For example it is not unusual to hear a financial reporter say, "Dow Jones Industrial Average (DJIA), was off nearly one percent by today's close," meaning the closing price of the current day was nearly one percent lower that the close of the day before.
Many factors can be used to explain why the market is up for a given trading session, but in the end, the core driver of prices is the frequency and net volume of purchases or sales. If more people bought than sold, or if buyers bought at more rapid intervals than sellers throughout the trading session, then the market is likely to close higher. This dynamic usually happens because new information occurs in the market that modifies the valuations for assets that professional money managers are modeling.
For example, during earnings season, better-than-expected reports from a number of companies could increase the projected values of these companies. Analysts use pricing models which are updated instantly or soon after surprise news has been released. When such news disseminates, it likely, in turn, drives up the market.
Additionally, job reports can impact it, as can the federal funds rate set by the Federal Open Market Committee (FOMC). Since that rate is what the government charges banks to borrow from the Federal Reserve, any changes will impact interest rates throughout the economy. In general, the stock market rises when interest rates move lower, because looser money means more consumer spending and business investment.
Indeed, it could be a change in investor attitudes following an election, a new product launch or geopolitical calming.
When reporters say the market is up, they often mean that the Dow Jones Industrial Average (DJIA), an index of 30 key stocks traded on the New York Stock Exchange and the NASDAQ, is up. If the Dow closed at 22,800 on Monday and at 23,000 on Tuesday, the market would be up at Tuesday's close.
When the Market Is Up, Most Investors Make Money
An up market does not necessarily have a positive impact on all investors. For example, traders who own stocks can benefit when the stock market is up. However, bond traders may lose money because bonds often fall in value when stocks rise.
When the market is up broadly and for a long period of time, investors must face a decision about how to proceed. For example, in December 2017, the stock market was well into one of the longest bull markets on record. Should investors take some profits and reduce risk? Of course, that is an individual decision based on one's personal situation and risk profile.
In January 2018, the market finally began a long-awaited correction, falling by about 12% in just a few weeks' time. Investors already holding stocks for months or longer still believed the market was up for them. However, investors buying just ahead of the decline did not agree. The market being up depends on who you are and when you started.