Why do markets sometimes react wildly to small numbers?

A company earns one dollar less per share than expected and the stock tanks. What gives? Why do little numbers seem to have big effects on markets? 

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Big little things
Welcome to the Know the Difference Minute for Wednesday, July 19th.
Why do markets sometimes react so wildly to small numbers? Inflation comes in at 0.2% instead of 0.3% for the month and investors go wild. A company earns one dollar less per share than expected and the stock tanks. What gives? Why do little numbers seem to have big effects on markets?
Some of it is because what looks small can actually be pretty big. Beating earnings by a dollar per share when the stock trades for a dollar is actually huge.
Also, surprises matter a lot. Imagine you’re driving and you suddenly find that you’re in Menominee, Wisconsin instead of Menomonee Falls? Or imagine you’re going on vacation and the destination is Palm Springs California instead of Palm Beach Florida. There can be surprises about where the economy is and surprises about where it’s headed. Small differences can be big.
I’m Brian Jacobsen, Chief Economist at Annex Wealth Management. That is your Know the Difference Minute.