Posted by stocker on April 1, 2010 in Stock market basics | Short Link

This is a quick Stocks For Dummies post about the meaning of “futures” that you hear before the market gets going every morning. If you watch any stock market shows on CNBC or Bloomberg in the morning before the stock market opens, you have probably hear the term “stock market futures” bandied about. Without going into the technical description of what it means, it is safe to say that whey they are up it is good and when the futures are down it is bad.

Between the time when the stock market closes and then reopens again the next morning, the world still turns and there are lots of economic things happening. While it may be night in America, it is daytime somewhere else, most notably in Europe and Japan. Good news, bad news, any kind of news is coming out while our markets are closed and that news may affect how the Dow opens.

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If there is good news in Europe, it may help raise the futures and give the NYSE a bump in the morning. Bad news from Japan may hurt the futures and mean a “down” opening. Additionally there can be any and all news overnight from America and American based companies that might affect the futures. Economic reports from the government involving GDP, unemployment and anything else also often come out when the market here is closed and they all have an impact on the futures.

So when you hear the talking heads discussing the futures before the market opens each morning, all you really need to know is that if the futures are down, the market will most likely open down. If the futures are up, the stock market will probably open with a gain. Of course, the more down or up the futures are means the bigger the plus or minus the open will be.

This does not mean that every stock will be up or down. In fact, bad or good news from one really big stock company can make the difference in the futures. When stocks like Apple or Google come out with really big news, it can be big enough to sway the futures either to the positive or negative. Penny stocks can never do anything to move the futures because they are irrelevant but some of the really influential companies can have quite an effect on how the markets open every day.


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