The stock market is subject to a kaleidoscopic range of factors that influence its movement. Expectations remain key. Even if an economic report is negative, if it comes in better than expected, the market may well rise. In addition to focusing upon individual companies and earnings, investors generally key into a number of key economic factors reported on a weekly or monthly basis.
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Unemployment remains among the largest single determinants of economic distress. High unemployment leads to lower consumer spending, which results in lower corporate profits with a negative stock market impact. Conversely, low unemployment generally reflects economic prosperity and, in conjunction with other factors, can positively affect the stock market. On Thursday mornings, the government releases the figure on weekly unemployment claims, while reporting the monthly employment numbers on the first Friday of the month. Investors closely watch these figures for signs as to the health of the labour market.
Gross Domestic Product
The Gross Domestic Product (GDP) represents the productivity of workers and overall economic output, and is a compendium of all produced products and services. Market participants also closely watch the data on manufacturing activity, which reflects the economic yield within that sector.
New and Existing Home Sales
The housing market is among the key drivers of economic activity, as it encompasses all manner of manufactured products that go into building and furnishing homes, as well as the services required to maintain them. It also reflects consumer confidence, as people are generally more inclined to purchase houses when they have stable jobs and optimistic outlooks.
According to Bloomberg Businessweek, consumer spending represents some 70 per cent of the economy. As such, investors pay close attention to any downturn or uptick in these figures. High consumer spending trickles down throughout the economy, leading to higher business investment, increased employment and greater confidence in the overall economic outlook.
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