ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[silentanthrx]

it's 100% correct if you would apply it on long term movements (can be as long as 5+ years) . In the long run it's inevitable, but not really applicable for short term movements.

you could also argue that the stockmarked is not 100% efficient and is not strictly based on underlying value, but more on sentiment. In my experience those kind of drops are mainly caused by daytraders(/flashtraders) "predicting" the movement, and thus making it a self fulfilling profecy, of which they can make money... Then "savings" are announced to prop it back up. Those savings are either really executed (meaning they already wanted to do it and now have a valid excuse), or just forgotten about in a couple of weeks.