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What dictates daily stock closing prices?

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Quick Answer

The primary factor determining daily closing stock prices is investor sentiment, particularly that of institutional investors, according to the Motley Fool. Closing stock prices can also be the product of price manipulation.

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Full Answer

The term "closing price" typically refers to the price of a specific stock at the end of a regular trading period, explains the Securities and Exchange Commission. In the United States, stock trading starts at 9.30 a.m. and ends at 4 p.m. EST. However, stock markets that participate in after-hours trading extend their operation beyond this period. Markets that feature both types of trading may have two disparate stock closing prices.

Investor reaction to news and other information affects the closing price of stock, reports the Motley Fool. After factoring in the information received throughout a trading day, investors develop certain expectations of a specific stock, and the closing price is a reflection of these expectations. Positive investor sentiment can drive up the price of a stock throughout a trading day, eventually resulting in a high closing price. The sentiment may spill over into the succeeding day and cause a sharp spike in the opening price. In certain cases, such trends may be indicative of speculation.

Some investors may manipulate closing prices in an attempt to profit, explains the Motley Fool. Sharp changes in the price of a stock with low demand just before the close of a trading day may be a sign of such manipulation.

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