Selected Report Activity
Cause And Effect

Reports that affect the stock indexes: Any report that comes out at 7:30 AM CT has little if any effect on the stock indexes. Virtually all of any of wild reaction takes place at 7:30 AM CT and can be seen in the early morning trading. However, it is possible that a bad economic report could set the trend for the rest of the day in the stock indexes. By shortly after 8:30 CT the trend should be apparent, and you can use it using TTEs.

Any report that comes out between 8:45-10:00 AM CT can affect the stock indexes. Don’t trade 15-20 minutes before or after those reports.

Reports that affect the bonds and notes are those that come out at 7:30 AM CT. But in addition to those reports, any report that comes out between 8:45-10:00 AM CT can affect the bonds and notes. Don’t trade 15-20 minutes before or after those reports.

How do you know which reports are the most important? You don’t. When the economy is rolling along, and everything is “coming up roses” there are a number of minor reports that will have little if any effect on any market. However, when times are bad, when the economy is very sensitive, when the stock market is jumpy and unsure, any report can send any financial or stock index market into a trading frenzy. To be safe, don’t trade 15-20 minutes after any report.

Reports that affect the commodities: Crop Production, Crop Progress, WASDE (World Agricultural Supply and Demand Estimates), Hogs and Pigs, Cattle on Feed, Cold Storage, NOPA Soybean Crush, Petroleum Institute (API), etc., reports—all can have a profound effect on their respective markets depending on the condition of the market.

Any report that is out of line with expectations will have an effect on the markets, in proportion to how much it differed from what was expected.

You can find out what is expected in the area of financial reports by clicking on the following link: http://biz.yahoo.com/c/e.html

Any time the Federal Reserve Chairman or head of any Central Bank speaks, it can have a profound effect on the financial and stock index futures. Keep in mind that financial futures includes the currencies.

Below is a table showing Selected Report Activity—Cause and Effect. Keep in mind that from time to time the reports change in content and name.

The prices of interest rate futures, like those for other futures contracts, react to fundamental factors of supply and demand. In this instance, price levels of interest rate futures are affected by the supply of, as well as the demand for, credit. Credit, in turn, is affected by economic forces in several areas, among them: Federal Reserve Board monetary policy, legislative and executive fiscal policies, business activity, and inflationary expectations. Generally, interest rate futures will rise in price amid signs of a slowing economy since a sluggish economy reduces credit demand. Conversely, a strong economy generally lowers futures prices since increased credit demand tends to force interest rates higher. Numerous economic indicators are closely watched by users of the financial futures markets. Outlined on this chart are several of the more closely watched indicators, as well as what generally happens once they are announced.

 

FEDERAL RESERVE BOARD POLICY

ACTIVITY
EFFECT

 

Fed Raises Discount Rate

 

 An increase in the borrowing rate for banks from the Fed usually results in increased rates for a bank's customers. This action is used to slow credit expansion. Financial futures down.

 

Money Supply Increases

 

 Excess money supply growth potentially can cause inflation and generate fears the Fed may tighten money growth by allowing the Fed funds rate to rise. Financial futures down.

 

Fed Does Repurchase Agreement

 

 Fed puts money into banking system by purchasing collateral and agreeing to re-sell later. This helps to bring interest rates down. Financial futures up.

 

Fed Buys T-Bills

 

 Fed permanently adds to banking system reserves which may cause interest rates to drop. Financial futures up

 

Fed Does Reverses or Matched Sales

 

 Fed takes money from the system by selling collateral and agreeing to repurchase same at later date. This decrease in money supply generally raises interest rates. Financial futures down.

ECONOMIC ACTIVITIES
ACTIVITY
EFFECT

 

Cattle on Feed Increases

 

 Cattle futures tend to fall.

 

Hogs and Pigs Show Decreasing Numbers

 

 Lean Hogs and Pork Bellies tend to rise.

 

Livestock Slaughter numbers rise

 

 Meat futures tend to fall.

 

Milk Production Increases

 

 Dairy products prices tend to fall.

 

Agricultural Prices Rise

 

 Agricultural futures tend to rise.

 

World Agricultural Supply/Demand Estimate Down (WASDE)

 

 Agricultural futures tend to fall.

 

Business Inventories Up

 

 Indicates a slowing economy since sales not keeping up with production. Financial futures up.

 

Cold Storage Inventories Fall

 

 Meat prices tend to rise.

 

Construction Put Into Place Rises

 

 Shows growth in economy and increased credit demand. Fed less accommodating in allowing interest rates to rise. Financial futures down.
Consumer (Sentiment) Confidence

If confidence is down:

Stock indexes fall and financials rise.

 

Consumer Price Index and Real Earnings Rise (CPI Report)

 

 Indicates rising inflation. Financials down.

 

Corporate Profits Fall

 

 Stock Index futures down.

 

Durable Goods Orders Rise

 

 Pickup in business activity usually leads to increased credit demand. Financial futures down. 

 

Gross Domestic Product Falls

 

 Reflects a slowing economy. Fed may loosen money supply prompting a decline in interest rates. Financial futures up.

 

Housing Starts Rise

 

 Shows growth in economy and increased credit demand. Fed less accommodating in allowing interest rates to rise. Financial futures down.

 

Import/Export Prices Fall

 

 Dollar Index tends to rise.

 

Industrial Production and Capacity Utilization Falls

 

 Indicates slowing economic growth. Fed may be more accommodating in allowing interest rates to fall. Financial futures up.
ISM Mfg. Index

 

Signals economic expansion when the PMI is above 50 and contraction when below.

 

 

Leading Indicators up

 

 Signals strength in the economy leading to greater credit demand. Financial futures down.
Michicgan Sentiment

 

Natural Gas Prices Fall (AGA Report)

 

 Reduces upward pressure on interest rates, thereby enhancing prices of debt. Financial futures up, Natural Gas future down.

 

Oil Prices Fall (API Report)

 

 Reduces upward pressure on interest rates, thereby enhancing prices of debt. Financial futures up, Crude Oil Complex futures down.

 

Personal Income Rises

 

 The higher one's income, the more is consumed prompting increased demand and higher prices for consumer goods. Financial futures down.
PMI Purchasing Managers Index

A PMI index over 50 indicates that manufacturing is expanding while anything below 50 means that the industry is contracting.

Should the PMI report an unexpected change, it is usually followed by a quick reaction in stocks. One especially key area of the report is growth in new orders, which predicts manufacturing activity in future months. A PMI over 50% means that manufacturing is growing and expanding.  A PMI under 50% means that manufacturing is declining.  a PMI of 42.7% or more over a long period of time means the economy as a whole is expanding.  A PMI of 42.7% of below over a long period of time means the economy as a whole is contracting.

 

Precious Metals Prices Fall

 

 Reflects decreased inflation. Demand for inflation hedges eases up. Financial futures up. Gold, Silver down.

 

Producer Price Index Rises (PPI Report)

 

 Indicates rising inflation. Demand for goods rises as well as prices. Investors require higher rates of return, pushing rates up. Financial futures down.

 

Retail Sales Rise

 

 Indicates stronger economic growth. Fed may have to tighten. Financial futures down.

 

Selected Interest Rates Rise

 

 Financial Futures down.

Unemployment Rises

 

 Indicates slow economic growth. Fed may ease credit, causing rates to drop. Financial futures up.

 

U.S. International Trade Rises

 

 Foreign Currency futures down.
WARNING: The material outlined here is intended for the purposes of education and information only. The generalizations cited do not take into account market expectations, which can also affect futures prices. Consequently, if expectations and reality do not match, the end result may not always be as illustrated. In all cases, the opposite outcome of a report will result in an opposite effect in the market. PLEASE NOTE: There are a number of reports that are issued by the U.S. Government and other sources that are not listed here. Some resulting activity exists only as tendencies. The basis for, and the names of reports as well as the times issued, and dates issued change periodically. Wherever possible we have given you the name of the report as we know it. Everything in this table is subject to change without prior notice.