Companies release most significant news outside market hours, and extended-session trading is much thinner than the regular day. Real trades set those prices, but far fewer of them, so the move can be larger and less durable than it appears.
Results and other significant announcements are usually released after the close or before the open. This gives everyone a chance to read the information rather than reacting in the middle of active trading.
So the largest reaction to company news frequently happens when the regular market is shut.
Far fewer participants trade in extended hours, so the gap between buying and selling prices is wider and a modest order can move the price more than the same order would during the day.
A dramatic after-hours percentage can rest on a small amount of actual trading.
When the regular session opens, far more participants arrive, including those who have now read the detail rather than the headline. Prices are re-established with much more trading behind them.
It is common for an extended-hours move to be partly retraced, or occasionally extended, once the full market is participating.
The closing price is the last trade of the regular session. Prices shown afterwards come from extended-hours trading and are usually labelled separately.
Comparing an after-hours price to the previous close is comparing two quite different kinds of market.
One question, no account: what did you come here for, and did you find it? A person reads these, and they shape what gets written next.
From StockMotive — the honest why behind every market move. Educational information only, not investment advice.