What primarily determines the market price of a share of common stock?

The market price of a share of common stock is primarily determined by the interplay of supply and demand for that stock. When demand for a stock increases—perhaps because investors expect strong future earnings or positive news regarding the company—the price tends to rise as more buyers compete to acquire shares. Conversely, if the supply of the stock exceeds demand, perhaps due to negative news or a general market downturn, the price will likely decrease as sellers lower prices to entice buyers.

This principle of supply and demand is fundamental in economics and applies directly to the stock market, where prices fluctuate based on the collective actions and perceptions of all market participants. While factors like company earnings reports, government regulations, and shareholder sentiments can influence investor perceptions and drive demand or supply, it is the fundamental dynamic of buyers and sellers in the market that ultimately sets the price for a share of stock. Thus, the balance of supply and demand is the key determinant of stock market prices.