Outside forces--in the industry, the economy, and the world--can affect a company's stock price.

When an industry is growing as a whole, many of the industry's companies will see earnings improvements. Similarly, when there's a negative trend, earnings problems develop for many companies inside the industry. Those who work for an airline know this all too well. They have seen the industry's earnings, and jobs, suffer when people fly less.

In addition, competitors can make waves by coming into, or leaving, an industry. You know how this works in a limited location: If a small town has one landscaping business, adding a competitor causes the first firm some financial trouble. In the same way, adding some competitors to an entire industry definitely stirs things up. Consider what would happen if a relatively new business suddenly introduced a newer, better way to listen to music--quickly reducing the demand for iPods. Do you think the stock price of Apple Computer, Inc., would dip, at least temporarily? It would if investors were expecting the new competitor to accomplish great things in the technology and/or music industries.