The Practical Guide to Wall Street: Equities and Derivatives

CHAPTER 13

Economic Data Releases

INTRODUCTION

In this chapter we look at the major economic data releases that are used by economists, investors, and traders to assess the current state, and likely future direction of the overall economy. In keeping with our practical focus, we restrict our attention to those data releases of greatest relevance and impact on the markets and deliberately limit the level of detail provided that are necessary to allow readers to properly assess the significance of each announcement. We then look at some of the specific factors that influence how markets react to unexpected outcomes in these data (the market’s reaction function). Given this picture of how information about the state of the economy impacts the financial markets, in the last section of the chapter, we reverse the inference and look at some equity market indicators that are commonly used as indicators of the state of the underlying economy.

There is a great diversity to the economic statistics of interest to market practitioners. Many are produced by agencies of the federal government while others come from professional associations, universities, and independent statistical organizations. Depending on what is being measured, and the organization performing the analysis, the data may be gathered from a variety of sources including direct reporting by the corporations and individuals themselves, either voluntarily or by legal obligation (i.e., tax declarations) or collected via phone ...