David Bridges
The following 12 indicators are ranked according to their potential impact on major U.S. stock indexes like the S&P 500 (SPX), Dow Jones, and Nasdaq (QQQ) on the day they are released. A rank of 1 indicates the highest market-moving potential, while a rank of 12 indicates the lowest. Market reactions are typically stronger to unexpected results compared to those that align with forecasts.
Eight times annually, the Federal Reserve convenes to decide whether to adjust interest rates. This event is the most significant market occurrence on the calendar.
Stocks tend to rise when the Fed lowers rates or hints at future cuts.
Stocks generally fall when the Fed increases rates or adopts a more hawkish tone than anticipated.
Typical move: 0.8 to 1.5% on SPX, often more pronounced on QQQ.
#2
Consumer Price Index (CPI)
This index tracks changes in the prices of everyday goods such as groceries, rent, and fuel over the past year. It is the most closely monitored inflation report.
Stocks rise when CPI readings are lower than expected, increasing the likelihood of rate cuts.
Stocks fall when CPI exceeds expectations, indicating that the Fed may maintain higher rates for an extended period.
Typical move: 0.6 to 1.2% on SPX.
#3
Non-Farm Payrolls (NFP)
Released on the first Friday of each month, this report details how many jobs the U.S. economy has added or lost. An excessive increase in jobs can exacerbate inflation and postpone rate cuts.
Stocks tend to rise with a moderate beat or when weak data increases the odds of rate cuts.
Stocks generally fall when job growth significantly exceeds expectations, coupled with rising wages.
Typical move: 0.5 to 1.0% on SPX.
#4
Personal Consumption Expenditures (PCE)
This is the Federal Reserve’s preferred measure of inflation. The core version, which excludes food and energy costs, is closely monitored by the Fed when making rate decisions.
Stocks rise when core PCE cools or falls below expectations.
Stocks fall when PCE readings are higher than anticipated, suggesting that rate cuts may be postponed.
Typical move: 0.4 to 0.8% on SPX.
#5
Producer Price Index (PPI)
This index measures price changes at the wholesale level, focusing on what businesses pay before passing those costs to consumers. It often serves as an early indicator of future CPI trends.
Stocks rise when PPI is lower than expected, indicating inflation may continue to decrease.
Stocks fall when PPI readings are unexpectedly high, particularly if they suggest upcoming CPI increases.
Typical move: 0.3 to 0.6% on SPX.
#6
Gross Domestic Product (GDP)
This metric measures the total economic output of the U.S. over a specific quarter. Strong GDP figures indicate robust earnings, while weak GDP figures raise concerns about potential recessions.
Stocks rise with solid economic growth that does not raise inflationary fears for the Fed.
Stocks fall following a significant shortfall due to recession concerns or exceptionally high growth that may delay rate cuts.
Typical move: 0.3 to 0.7% on SPX.
This indicator tracks consumer spending across retail, online platforms, and restaurants. Given that consumer spending accounts for roughly 70% of U.S. GDP, it serves as a direct gauge of economic health.
Stocks tend to rise with strong sales figures, indicating consumer confidence in spending.
Stocks fall with a significant miss, suggesting a slowdown, or with exceptionally strong figures that raise inflation concerns.
Typical move: 0.3 to 0.5% on SPX.
This refers to the interest rate established by the Fed for overnight bank lending, which impacts mortgages, credit cards, and business loans. The rate is set during each Federal Open Market Committee (FOMC) meeting, rather than being released as a separate announcement.
Stocks rise when the rate is cut or anticipated to decrease, enhancing investment and risk appetite.
Stocks fall when the rate remains high or increases. Growth stocks and the QQQ index are particularly affected.
No isolated market move. Refer to the FOMC Decision above.
Released concurrently with the NFP report, this indicator reflects the percentage of individuals actively seeking employment but unable to secure jobs. It usually plays a secondary role to payroll data on release day.
Stocks can rise when unemployment ticks up slightly, boosting the likelihood of rate cuts.
Stocks can fall sharply when unemployment rises significantly, raising recession fears.
Typical move: secondary to NFP on the day of release.
This monthly survey assesses the performance of service-sector businesses. A reading above 50 indicates expansion, while below 50 indicates contraction. The services sector accounts for about 80% of the U.S. economy.
Stocks tend to rise when the reading exceeds 50 and surprises positively.
Stocks fall sharply on a reading below 50, suggesting contraction in this crucial sector.
Typical move: 0.3 to 0.6% on SPX.
#11
ISM Manufacturing PMI
This index follows a similar methodology to the ISM Services PMI but focuses on manufacturing. It includes a Prices Paid sub-index that can indicate early inflationary pressures.
Stocks, particularly in the industrial sector and the Dow, rise when the manufacturing index exceeds 50 and surprises positively.
Stocks fall on weak readings, especially if they confirm a trend of contraction.
Typical move: 0.3 to 0.6% on SPX.
Every Thursday, this report shows the number of individuals filing for unemployment benefits for the first time during that week. A single bad week is usually dismissed as noise; however, a rising trend over several weeks becomes significant.
Stocks can experience slight increases when claims rise marginally, as this may boost rate cut expectations.
Stocks can decline when claims spike over multiple weeks, indicating increasing layoffs.
Typical move: 0.1 to 0.3% on SPX.
The ranks reflect typical same-day impacts on indexes rather than their economic significance. Market reactions may often reverse within hours, especially during FOMC press conferences. The percentage moves mentioned are historical averages intended as baseline estimates and should not be considered absolute rules. Actual market volatility depends significantly on how the data deviates from Wall Street’s predictions and whether the current market environment is more sensitive to inflation or growth.
