Why would a stock close at one price on one day, but then commence trading the next day a few dollars lower? Well, stocks often open higher or lower if there's been some major news released after the market close the day before. For example, if the One-Legged Chair Co. (ticker: OOOPS) announced that a batch of recent legs were defective and issued a recall, many more sell orders than buy orders might accumulate overnight for the stock. Before trading begins, the share price would probably be adjusted southward to better match buys with sells.
Here's a real-life example: After the market closed on Sept. 18, 2002, computer services company Electronic Data Systems
On Sept. 18, before the bad news broke, the stock opened at $37.00 per share, hit an intra-day high of $37.85, and closed at $36.46. Ho-hum. But jeepers -- the next day, Sept. 19, the stock opened at $21.90 -- down a whopping 40% from the previous close. It closed on the 19th at $17.20.
The news was enough to knock down (to lesser degrees) other computer-related concerns, too.
More recently, online wunderkind eBay
Stock prices often don't move in straight lines.
Learn more about eBay and EDS in these articles:
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