Fundamental Analysis Objectives
Fundamental analysis (Fundamental analysis) Are methods of qualitative and quantitative analysis of company reporting documents, aimed at determining the real value (intrinsic value) her assets and predicting her future income.
One of the practical uses of fundamental analysis is to identify undervalued (undervalued) companies, buy these shares in the hope, that the market will appreciate them and their price will rise. Comparing companies in the same industry, can be identified “unappreciated” And “overvalued” paper.
As part of the fundamental analysis, an in-depth study of information about the current state of the company and the prospects for its development is carried out, materials, which the company publishes about itself, accounting statements of profit and loss. Based on the analysis results, the composition of the investment portfolio is determined. Shares of companies are selected for it, characterized by stable financial and economic indicators and having a high potential for further development. A number of macroeconomic indicators are also taken into account., such as inflation, Central Bank interest rate, level of business activity. At the same time, the fundamentalist analyst abstracts from the behavior of market stock prices. Therefore, fundamental analysis perfectly complements technical analysis, based on the study of the dynamics of the market price and trading volume. The combined application of both methods allows you to get a holistic view of the market situation and most accurately predict the direction of change in stock prices.
Selection of promising stocks
One of the most important tasks, facing a stock market participant, is the division of all issuing companies into two groups: “fundamentally strong” And “fundamentally weak”. What are the criteria for this?? Classical fundamental analysis does not give an exact answer to this question.. Each investor independently compiles a list of the most important criteria for him, based on your own investment preferences. Let's say, American fund Idex Great Companies of America is focused on acquiring shares of enterprises, founded at least 50 years ago.
First of all, you need to find out, what does this company do, and what type of activity brings her main income. Ideally, an investor should be well versed in all industries, represented on the stock market. If that's not the case, what is the best way to focus on paperwork from the most understandable types of business, avoiding investments in those industries, about which there is no clear understanding of their “internal kitchen”. According to the great investor Warren Buffett, financial success in the stock market is directly proportional to the degree of understanding of the internal principles of the companies. “Invest in your area of expertise, – he says. It is not that important, how wide is this sphere, and that, how accurately do you define specific parameters ". The first criterion follows from this statement.: business clarity. This is the most subjective criterion., but he plays a critical role in the selection of objects for investment. If the investor does not have deep knowledge in the field of activity of the studied company, then it is better for him to switch his attention to another issuer, since there are enough of them on the market. Unlikely, that the acquisition of shares in companies, doing business in unfamiliar areas, will bring profit. Don't rely too much on clues, which can be deducted in public policy reviews. Even if the review is unmistakable, and the investor will be able to buy shares of a good company at an attractive price, then subsequently he may still incur losses due to the fact, that he will not be able to adequately respond to incoming news.
Three levels of fundamental analysis
Fundamental analysis is conducted at three levels:
- Analysis of the state of the economy as a whole
- Industry analysis
- Analysis of companies
The state of the stock market economy as a whole
At this level, the influence of economic and political factors on the development of the stock market is considered.. Fundamental analysis allows you to find out, how favorable the overall situation is for investment. Macroeconomic volatility matters, as it can affect the expected return and risk even for a well-balanced portfolio.
Particularly important indicators are:
- base interest rate in the country and its change. A rate hike negatively affects the share price, and the decline, vice versa, supports their growth. This is mainly explained by the high degree of dependence of companies on loans.;
- volume of GDP and VNP. An increase in these indicators means an increase in the production volumes of companies, what is reflected in the performance of the stock market;
- oil prices. They are especially important for evaluating companies., somehow related to the fuel sector, for example, automotive giants Ford General and Motors, airlines, etc..
- political system, ruling party. The arrival of power of the Democrats in the United States negatively affected the state of the American stock market. Since it is considered, that Democrats have a negative attitude towards large companies (whose shares are traded on the stock exchange), and tend to increase the tax burden;
- level of economic activity. It is most clearly reflected by the ISM business activity indices in the service and manufacturing sectors.. The growth of indicators characterizes the rise in the stock market.
Analysis of specific areas of the securities market
At this stage, the most promising industries are determined. The dynamics of the development of industries is reflected by the industry stock indices. The most famous of them are DJIA (Dow Jones Industrial Average), reflecting the dynamics of development of the industrial sector, DJTA (Dow Jones Transportation Average) - transport sector and DJUA (Dow Jones Utilities Average) - utilities sector. Существует также целый ряд индексов NASDAQ: Nasdaq Financial-100 is determined on the basis of about one hundred shares of financial companies. Nasdaq Industrial Indices, Nasdaq Transportation, Nasdaq Bank, Nasdaq Telecommunications, Nasdaq Insurance, Nasdaq Computer, Nasdaq Other Finance, Nasdaq Biotechnology characterizes exchange rate fluctuations in industrial and transport companies, banks, telecommunications, insurance and computer companies, financial non-banking institutions, companies, working with biotechnology.
In the course of industry analysis, a potential investor chooses an industry, of greatest interest to him.
All industries are conventionally divided into the following main groups:
- Growing industries (They are characterized by a constant and outstripping increase in sales and profits compared to other industries.. Companies in these industries are called growth companies., and their stocks are growth stocks.
- Stable industries (They are distinguished by the stability of their development; they are less, than others, affected by the situation in the economy as a whole.
The following are the most general categories of stocks in companies in stable industries.:
- Blue Chips – best investment properties, pay dividends even during unfavorable economic conditions, have a monopoly on the market, financial strength and effective management.
- Defensive - company shares, showing relative resistance to bad market conditions, more or less consistently making a profit and paying dividends.
- Profitable - shares, on which generous dividends are paid. The amplitude of price fluctuations and the capital growth potential of profitable stocks are insignificant.
- Cyclical industries (are particularly sensitive to, what phase is the economy in (rise, decline, a crisis). These industries include, first of all, industries, producing means of production, as well as durable goods. The return and risk on investments in stocks of companies in cyclical industries are significantly dependent on the phase of the business cycle.).
- Fading industries (Industries, using outdated technology or producing outdated products).
- Speculative industries (Industries, which, due to the lack of reliable information, pose a particular risk for investors).
Condition of individual firms and companies
By choosing an industry, which seems the most attractive and promising, it is important to correctly identify with the company itself, which shares are most profitable to buy.
To do this, you need to analyze the following indicators of companies' performance:
- data of annual and quarterly reports on the company's activities – annual report, main document, most fully reflects the activities of the company. It is not so much published earnings that should be taken into account., how much is the dynamics of indicators and their essence;
- materials, which the company publishes about itself;
- intelligence, reported in public speeches of the management of the joint stock company;
- launch of new products;
- mergers and acquisitions;
- increase / decrease in dividend payments;
- availability of government orders from the company;
- litigation, in which the company is involved;
- change of manager;
- top management shares.
The analysis of companies is the most complex and time consuming. At this stage, the financial and economic situation of the company is studied over the past several years., usually, 3-5 years, efficiency of company management and forecasted prospects for its development.
Macroeconomic statistics
Macroeconomic indicator – this is a numerical indicator, characterizing the state of the economy of a country in a certain aspect (gross domestic product, Inflation, employment rate, production volumes, the state of the trade, etc.).
Data on macroeconomic indicators are released to the market on a regular basis, at a strictly defined time and much more often, how the discount rates change, change of government, natural disasters, etc.. Most indicators are published monthly.
The time of the release of data on macroeconomic indicators is known in advance. For example, in the USA, they are usually voiced in 16-30 And 18-00 by Moscow time (MSC).
Macroeconomic indicators usually have three meanings:
expected value (Forecast, FRC, Seen) – the forecast is obtained as a result of the aggregate opinion of analysts. This value can be adjusted as it approaches the release date of the real value., as new additional data appears. The expected value is a benchmark for the market.
Real or actual (Real, Actual ACT) – это значение, which is published as the official.
Revision or corrected value (Previous, PRV, Last) – often together with the next publication of the same indicator, an updated value of this indicator for the previous period is given. Generally, revisions do not have a noticeable impact on the market., because if real indicators characterize the state of the economy of the last month or quarter, then the data revision characterizes an even more distant period in the past.
Possible market reaction to the release of fundamental indicators.
| № p.p.. | Comparison of the forecast and the official value of the macroeconomic indicator. | Impact on the market | Notes (edit) |
| 1 | The official value is better than the forecast | Growth in the values of major stock indices and strengthening of the national currency | |
| 2 | Official value matches forecast | Lack of market reaction to news. The market has already taken this value into account in the current course. | |
| 3 | The official value is worse than the forecast | Fall and stock market, and the national currency rate | |
| 4 | According to forecasts, the release of the worst indicator value in comparison with the previous period was expected, the official value turned out to be better | Growth of indices and the exchange rate of the national currency. At the same time, the market reaction may be brighter., than in the case 1. The news will be regarded as unexpected. | |
| 5 | According to forecasts, the release of the best indicator value compared to the previous period was expected, the official value turned out to be worse | Falling indices and national currency rates. At the same time, the market reaction may be brighter., than in the case 3. The news will be regarded as unexpected. |
US macroeconomic indicators
- Auto and Truck Sales - Sales of cars and trucks
Definition: indicator of monthly sales of cars and trucks, produced domestically.
Market influence (A-F): With –
A source: vehicle manufacturing plants, seasonal indicators of the Ministry of Commerce
Exit time: from the first to the third working day of each month (data for the previous month is published).
Auto and Truck Sales считается важным показателем потребительского спроса населения, which accounts for approximately 25% of the total retail sales in the country, what makes the automotive sector a leading indicator of the country's economy, and the degree of influence on the securities market is high. Each car manufacturer reports on sales results separately, usually within the first three working days of the month.. Using all individual manufacturer reports, you can also calculate the sales rate taking into account seasonal factors, what exactly does the Ministry of Commerce do during the preparation of the annual report.
- Business Inventories – Материально-производственные запасы
Definition: total inventory indicator
Market influence (A-F): With –
A source: US Department of Commerce Statistics Bureau (U.S. Census Bureau of the Department of Commerce).
Exit time: usually on the fifteenth of every month at 8:30 a.m. AND (data for the previous two months).
Inventory statement includes sales (sales) and statistics on inventories (inventory statistics), covering all three stages of the production process: production (manufacturing), wholesale (wholesale), and retail (retail). Степень влияния показателя The business inventories на рынок ценных бумаг – незначительная. It increases only in those cases, когда колебания показателей по Retail inventories достаточно сильные, to change the cumulative inventory profile (inventory profile). В этом случае он способен влиять на общую картину GDP (GDP) .
- Construction Spending – Расходы на строительство
Definition: indicator of the cost of new construction, as a private (residential and non-residential), and municipal throughout the country.
Market influence (A-F): D
A source: United States Department of Commerce Census Bureau. (U.S. Census Bureau of the Department of Commerce).
Exit time: first working day of the month at 10:00 a.m. AND (data for the previous two months).
The report on construction expenses is divided into several parts:
- data on expenditures for construction of new residential buildings, • data on construction costs of new non-residential buildings
- data on expenditures for the construction of new municipal facilities.
The monthly fluctuations in the indicator are so significant, which are subject to constant adjustment, as a result, the report rarely has a significant impact on the market. Only results for a period of three months or more can be taken into account as significant.
- Consumer Confidence – Индекс доверия потребителей
Definition: indicator of consumer assessment of current economic and labor market conditions, as well as career prospects and increased income.
Market influence (A-F): B-
A source: The Conference Board
Exit time: last Tuesday of the month at 10:00 a.m. AND (contains data for the current month).
Conference Board проводит ежемесячный опрос 5000 families in order to determine the degree of consumer confidence. Survey results can be helpful in forecasting consumption, by identifying noise among sudden, subtle changes in consumer sentiment. Index changes can be taken seriously, at least, by five or more points. The consumer confidence index consists of two components: consumers' assessments of the current conditions and their expectations for the future. Future expectations determine 60% of the total index. Other 40% depend on the assessment of the current conditions. The Future Expectations Index is generally seen as a more powerful leading indicator., rather than an index of current conditions.
- University of Michigan Consumer Sentiment Index
Definition: indicator of consumer assessment of current economic and labor market conditions, as well as career prospects and increased income.
Market influence (A-F): B-
A source: The University of Michigan (University of Michigan)
Exit time: the preliminary report comes out in 10:00 a.m. ET on the second Friday of the month (contains data for the current month); final – in 10:00 a.m. ET on the last Friday of the month (contains data for the current month).
Michigan Consumer Sentiment Index (University of Michigan Index) almost identical to the index, calculated Conference Board, except that, that there are two versions of monthly reports on it: preliminary and final. Like an index, рассчитываемому Conference Board, The University of Michigan Consumer Confidence Index also has two components: index of current conditions and index of expectation of the future. The latter is a component of the leading indicators index (LEI), рассчитываемого Conference Board. The degree of influence of the consumer confidence index on the market is high
- Consumer Credit - Consumer loan
Definition: consumer credit debt indicator.
Market influence (A-F): D-
A source: Federal Reserve System USA (U.S. Federal Reserve).
Exit time: the fifth working day of the month on 3:00 p.m. AND (data for the previous two months).
Consumer credit – статистический отчёт U.S. Federal Reserve, whose data reflect the debts of the population for the purchase of consumer goods and services. Data is so volatile, which are regularly adjusted. Отчёту Consumer credit предшествует выпуск индекса Сonsumer spending, which reflects the summarizing data on consumer spending of the population, включающие еженедельные расходы по Store sales (Expenses for essential goods), Аuto sales (Light vehicle sales), Сonsumer confidence (Consumer Confidence Index), Retail sales (Retail Sales Index), And Рersonal consumption (Individual consumption index).
It should be noted, что итоговые показатели Consumer credit находятся в прямой зависимости от кредитной политики государства.
- CPI: Consumer Price Index – Индекс потребительских цен
Definition: indicator of changes in the value of a consumer basket of goods and services.
Market influence (A-F): B+
A source: Employment Bureau of the United States Department of Labor (Bureau of Labor statistics, U.S. Department of Labor).
Exit time: usually on the thirteenth of every month at 8:30 a.m. AND (data for the previous month).
The Consumer Price Index (СPI) determines the level of the consumer basket of goods and services, where are included: Food, clothing, spending on education and health, transport, communal payments, rest, etc.
CPI – most widely used inflation indicator, which is used to calculate the subsistence level, so necessary for the layout of state programs in the country's budget. First, data is collected on the value of the consumer basket in 85 cities of the country, after which the Bureau of Employment of the United States Department of Labor (Bureau of Labor statistics, U.S. Department of Labor) summarizes the results and determines the index value. Its basic value in 1995 year taken as 100, ie. any value above 100, for example, meaning 131,5 would mean, that the value of the basket of goods this month is 31,5% above, than in the base period.
- Durable Goods Orders - Durable goods orders
Definition: indicator of changes in the value of a consumer basket of goods and services.
Market influence (A-F): B
A source: Employment Bureau of the United States Department of Commerce (The Census Bureau of Department of Commerce).
Exit time: usually on the twenty-sixth of the month at 8:30 a.m. AND (data for the previous month).
Durable Goods Orders (DGO) is an indicator of the volume of orders, which manufacturers have for durable goods. They mean those types of goods, whose term of use is from three years and more. The growth of orders stimulates activity in the manufacturing sector of the economy, and investors, anticipating the growth of future profits of enterprises, are active in the stock market, whose value starts to rise. Index DGO настолько волатилен и энергозависим, which is regularly revised and adjusted. Объясняется это наличием в индексе DGO объёма заказов на товары предприятий военно-промышленного комплекса. Implied, as a piece of civilian equipment, and military, up to aircraft and ships of the navy.
- Employment Report - Employment report
Definition: labor market indicator, working week and hourly wages.
Market influence (A-F): A
A source: Employment Bureau of the United States Department of Labor (Bureau of Labor statistics, U.S. Department of Labor).
Exit time: first Friday of the month in 8:30 a.m. AND (data for the previous month).
Employment report (employment report) is two separate reports, which are the result of two separate studies through:
- population survey (Household survey);
- survey of enterprises on the average length of the working week, salary, hourly wages (The establishment survey).
В первом исследовании Household survey используются результаты опроса 60.000 semey. It helps determine the unemployment rate.
The second study uses survey results 375.000 enterprises. Тем самым формируются показатели Nonfarm Payrolls, Average Workweek и Average Hourly Earnings, determining the number of new jobs, created during the reporting period in the non-agricultural sector, average workweek and hourly wages in the industrial sector.
- Existing Home Sales – Продажи жилья на вторичном рынке
Definition: показатель продаж на вторичном рынке недвижимости. Market influence (A-F): C
A source: National Ассоциация Риэлтеров (The National Association of Realtors).
Exit time: usually on the twenty-fifth of every month at 10:00 a.m. AND (data for the previous month).
Existing Home Sales – this is an indicator, determining the volume of sales in the secondary real estate market. It is preceded by a different report every month. – Housing starts (Housing construction) , rather a reflection of housing stock,than serving as an indicator of the need for housing. Отчёту Existing home sales предшествует выпуск ещё одного ключевого указателя потребности жилья – New home sales (Sale of new residential buildings) , который во многом дополняет картину отчёта. Sales (Sales) are in direct proportion to the size of interest rates, but, in spite of this, реагируют на изменения в показателях с задержкой в несколько месяцев. Sales (Sales) also determine the level of demand for construction immediately after the end of the recession.
- Factory Orders - Orders of industrial enterprises
Definition: indicator of the status of the volume of orders, stocks and supplies (selling) industrial enterprises.
Market influence (A-F): D+
A source: Bureau of Statistics, US Department of Commerce (U.S. Census Bureau of the Department of Commerce).
Exit time: first working day of the month at 10:00 a.m. AND (data for the previous two months).
Factory Orders (Orders of industrial enterprises) состоят из Durable orders (durable goods orders) And Nondurable orders (orders for non-durable goods) . TO Consumer Nondurable относятся такие товары недлительного пользования, how, for example, food and tobacco, monthly indicators which are easier to predict, нежели показатели Durable orders. In spite of this, рынок всегда находится в ожидании корректирующих данных на Durable orders because, what do they make up 54% of the total number Factory Orders (Orders of industrial enterprises).
- Gross Domestic Product (GDP) - Gross domestic product (GDP)
Definition: indicator of the change in the market value of goods and services within the country for a certain period of time.
Market influence (A-F): B
A source: Bureau of Economic Analysis, USA. Ministry of Commerce
Exit time: The third or fourth week of the month in 8:30 a.m. AND (for the previous quarter, with subsequent corrections, issued in the second and third months of the quarter).
Gross Domestic Product (GDP) is a broad measure for determining the degree of activity in economic activity. Пересчитанные за год квартальные процентные изменения GDP отражают темпы общего экономического прироста. Основными компонентами GDP are: sphere of consumption, investment, net export, state procurements, and inventories. Consumption is the most significant and largest component, составляющим приблизительно 2/3 GDP. Дополнительно к данным GDP в отчёте указывается дефлятор GDP, свидетельствующий об изменениях номинальных цен как в целом по GDP, and for each component separately
- Housing Starts and Building Permits - Housing and Building Permits
Definition: indicator of the number of private houses and houses under construction, for which construction permits have been obtained.
Market influence (A-F): B-
A source: Bureau of Statistics, US Department of Commerce. (U.S. Census Bureau of the Department of Commerce).
Exit time: usually on the sixteenth of the month at 8:30 a.m. AND (data for the previous month).
Housing Starts And Building permits являются показателями числа строящихся частных жилых домов и домов, for which construction permits have been obtained. TO Housing Starts those houses belong, on which construction work has already begun (earthworks were carried out and the foundation was laid). TO Building permits относятся те строительные объекты, for which permits have already been obtained to start construction. Увеличение количества Building permits (Building Permits) And Housing Starts (Houses under construction) Happens, usually, a few months after the interest rate cut.
- Industrial Production and Capacity Utilization - Production and Utilization of production facilities
Definition: an indicator of the change in the volume of production by industrial enterprises and an indicator of the degree of utilization of industrial capacities.
Market influence (A-F): B-
A source: U.S. Federal Reserve (Federal Reserve).
Exit time: usually on the fifteenth of every month at 9:15 a.m. AND (data for the previous month).
Статистический отчёт Federal Reserve содержит показатель изменения объёма производства промышленными предприятиями страны, shares and bonds of public utilities and calculation of the used production capacity. Industrial production is a key indicator of the state of a country's industry. It accounts for about 40% economy of the whole country, which justifies the high degree of influence on the stock market. Of particular interest is the percentage change in industrial production compared to the previous month.. If production grows, it grows, respectively, and value for money, which unwittingly stimulates the stock market to grow, and the bond market falls.
- Initial Claims – Первичные обращения за пособиями по безработице
Definition: rate of change in the volume of initial applications for unemployment benefits.
Market influence (A-F): C +
A source: US Department of Employment (U.S. Department of Labor)
Exit time: every Thursday at 8:30 a.m. AND (weekly data, expired before the previous Saturday).
Data, published every Thursday, are an indicator of the number of initial applications of the unemployed to the Employment Department for receiving state unemployment benefits. Due to the volatility of weekly data, most analysts prefer to track the four-week moving average to get a clearer value in determining the main direction of the market.. A stable bias is usually taken, at least, 30K to obtain a significant change in direction of travel. The report contains statistics on two indicators: by the number of people, receiving state unemployment benefits and the insured benefit rate indicator.
- Money Supply M2 - Money Supply M2
Definition: indicator of the money supply and money supply in the economy
Market influence (A-C): D
A source: Federal Reserve Bank Board of Governors (Federal Reserve Board).
Exit time: every Thursday at 16:30 ET (data for the previous two weeks)
Monetary aggregates M (M1, M2, M3) are indicators of the money supply or money supply in the economy.
M1 учитывает наиболее ликвидные ресурсы: cash currency, funds on accounts “poste restante”, traveler's checks.
M2 Includes M1 с добавлением срочных вкладов (to $100 000) and other highly liquid savings.
M3 Includes M2 плюс долгосрочные банковские депозиты и срочные вклады крупных размеров.
В начале 1980-х годов внимание Fed было обращено больше к росту показателя M1, nose 1994 года показатель M2 стал более значимым для экспертов. In the United States M2 обосновано является основным финансово-банковским показателем находящейся в обращении денежной массы и наличия и предложения денег различных типов на финансоом рынке. The change from the previous value is usually measured as a percentage., however, there is still such a form of measurement, как доля от GDP (GDP) . In classical economic theory, it is customary to consider, what M2 отражает предложение валюты, which means, при росте M2 курс валюты должен падать, однако так происходит не всегда. M2 отражает активность финансового рынка и темпы роста ВВП. Также темп роста M2 определяет уровень ставок (the higher the first, the higher and the second), which means – profitability of foreign currency deposits. Еженедельные колебания показателя M2 не оказывают заметного влияния на рынок. Специалисты предпочитают использовать особенности поведения индикатора M2 в долгосрочном аспекте, as they are able to most accurately predict the direction of the inflation and GDP trend. Значение индикатора M2 может регулироваться операциями государственного казначейства на открытом рынке. Its volume largely depends on the volume of auctions held on securities of the state internal loan.. Снижения показателя M2 производится путем увеличения продаж государственных долговых ценных бумаг (bonds, bills, mortgages, etc.), which means the actual withdrawal of money from circulation and storage in accounts with the central bank. Увеличение M2 производится обратной операцией – redemption of government bonds.
- Leading Economic Indicators – Опережающие экономические индикаторы
Definition: indicator of change in business activity
Market influence (A-F): D –
A source: National Industry Association (The Conference Board).
Exit time: usually in the first working days of the month in 8:30 a.m. AND (data for the previous two months).
The Leading Indicators представляет собой составной индекс, formed from previously announced ten economic indicators, selected based on their economic value, for that, to proactively predict changes in business activity and give signals for a market reversal. These include: volume of orders for consumer goods, for industrial goods, the number of initial appeals of the unemployed, average working week, wholesaler activity index, new construction permits, S index level&P500, monetary index M 2 adjusted for inflation, interest rate spread of 10-year Treasury bonds and financial funds, University of Michigan Consumer Expectations Index.
- New Home Sales – Продажа новых жилых зданий
Definition: new residential building sales.
Market influence (A-F): C +
A source: Statistical Office of the Ministry of Commerce (The Census Bureau of the Department of Commerce).
Exit time: usually the last working day of the month at 10:00 a.m. AND (data for the previous month).
New Home Sales – it is an indicator of the volume of new residential single-family houses sold and put up for sale. New Home Sales responds to changes in interest rates with some delay. At the beginning of the exchange cycle, when the demand for new residential buildings increases, New Home Sales demonstrates strong performance, rendering, thereby, influence on the dynamics of trading in the market. With a decrease in the rate of sales at the end of the exchange cycle, indicators of New Home Sales are also decreasing. In conclusion, it should be noted, that with a decrease in stocks for the sale of new single-family houses, the need for their construction increases to maintain a certain stock. Finally, annual changes in housing cost indicators are a good indicator of inflation in the average housing cost. Due to the high susceptibility of New Home Sales indicators to large fluctuations, they are regularly adjusted. For this reason, monthly numbers are perceived as inconclusive., therefore rarely affect the market. The market prefers the Existing Home Sales report, which is four times as important (Existing Home Sales accounts for 84% from the volume of sales in the real estate market) and whose results come out earlier, than the results for New Home Sales.
- Personal Income and Consumption - Individual income and consumption
Definition: indicator of change in individual income and expenses.
Market influence (A-F): C +
A source: Bureau of Economic Analysis, U.S. Department of Commerce (The Bureau of Economic Analysis of the Department of Commerce).
Exit time: monthly on the first working day in 8:30 a.m. E.T. (data for the previous two months).
Determination of the indicator of individual income provides for the accounting of income from all sources. Largest component of total income – wages of workers and employees, number, which can be obtained through the use of payrolls and earnings data from employment reports. There are many other sources of income behind this., including rent income, government subsidy payments, interest income and dividend income. Individual income is a simple indicator of the future consumer demand of the population., although he is not perfect, some deviations are possible. Recessions usually happen then, when consumers stop spending, which entails a decrease in the turnover of income growth. Relying solely on them, can, hence, skip turning point, when consumer spending stops rising. Personal Income and Consumption also contains a section, covering personal consumption expenditures, known as PCE. PCE is divided into three categories: expenditure on durable goods, non-durable, and services. Retail Sales Report provides clear information on durable and non-durable goods spending, while service costs are growing at a fairly steady pace. The impact of the report on the market is great. This is facilitated by its predictability combined with retail sales results..
- PPI: Producer Price Index - Producer price index
Definition: indicator of changes in wholesale prices of producers of goods and services.
Market influence (A-F): B-
A source: Employment Bureau (Bureau of Labor Statistics), US Department of Employment (U.S. Department of Labor).
Exit time: usually on the eleventh of every month at 8:30 a.m. AND (data for the previous month).
PPI is an indicator of changes in wholesale prices for goods and services. The PPI includes three product categories:
- Raw material prices (crude)
- Work in progress (intermediate)
- Finished products (finished)
Close scrutiny, due to its significant impact on the market, index of finished goods exposed. It represents the prices of goods, ready for sale to the consumer. The study is about 3500 product names. The data is then summed with a factor, proportional to their contribution to GDP(GDP). Their share of the contribution to PPI accounts for a little less than half (about 40%) consumed goods (consumer goods, Cars, food, etc.). Due to their exposure to volatility from month to month, analysts prefer to be careful in their forecasts and use aggregated indicators for a year or even several years for analysis. The quoted commodity prices can be viewed as an indicator of inflation.. Many analysts use the commodity price indicator also to predict the level of retail prices.. The timing of the PPI announcement also contributes to this.: it comes out ahead of the CPI (CPI). It should be noted, that an increase in PPI leads to a fall in the rate, like bonds, and shares, while the decline in PPI leads, vice versa, to their growth.
- Productivity and Costs – Производительность и себестоимость
Definition: performance and cost indicator, associated with the release of a unit of production.
Market influence (A-F): D+
A source: Employment Bureau (Bureau of Labor Statistics), US Department of Employment (The Bureau of Labor Statistics of the Department of Labor).
Exit time: usually on the seventh of the second month of the quarter in 8:30 a.m.(data for the previous quarter).
Ежеквартальный показатель Рroductivity and costs (productivity and cost) gives a clear picture of worker productivity and costs, associated with the release of a unit of production. During a period of inflationary anxiety, this indicator may have an impact on the market.. If performance drops, then the costs, affecting unit costs can grow faster, than workers' earnings based on hourly wages. Ежеквартальные показатели Рroductivity and costs могут колебаться, but based on quarterly GDP figures (GDP), are a good indicator of production growth, you can predict the possible impact of the indicator on the market. Therefore, the report rarely has a significant impact on the market.
- Regional Manufacturing Surveys – Индекс промышленных предприятий в регионах
Definition: an indicator of the general economic situation in Pennsylvania and Delaware (The Philadelphia Fed Index) and the index of industrial enterprises of the Chicago region (Chicago PMI).
Market influence (A-F) : The Philadelphia Fed Index и Chicago PMI – B; others - D.
A source: United States Department of Commerce Census Bureau. (U.S. Census Bureau of the Department of organizations) and the Federal Reserve Banks (Federal Reserve banks).
Exit time: The Philadelphia Fed Index is published every third Thursday of the month in 10:00 a.m. AND (data for the current month).
Chicago PMI – on the last working day of the month at 10:00 a.m. AND (data for the current month).
There are many regional indices of industrial enterprises, which are classified in the order of priority of their release and significance for a particular region. The Philadelphia Fed Index comes out first, usually within the third week of the month, for which the indicator is calculated. Then a number of less significant indices come out, and only on the last working day of the month the index of industrial enterprises of the Chicago region is published (Chicago PMI). Multiple indexes, such as, for example, the Atlanta и Richmond Fed surveys, comes out after the release of NAPM and is not of great importance to the market. NAPM (National Association of Purchasing Management) - monthly published "Business Report" (Report of Business) – contains an integral view of the state of the industry. The Chicago Area Manufacturing Index is calculated by the Association of Managers, similar to the NAPM: if its value exceeds 50%, then this signals the economic activity of the industrial sector of the economy, if the indicator falls below 50% – about the recession. For Philadelphia and Atlanta Fed, Region's Growth Signal Exceeds Zero, negative meaning, respectively, is an indicator of a decline in economic activity. Index of industrial enterprises in the regions, this is especially true of such components as The Philadelphia Fed Index and Chicago PMI, influences forecasting of national NAPM. Both of the above indices require special attention., what is related to the time of their publication, and with that important fact, that both of these regions are profiling in the country's economy. So the degree of influence on the market of these indices is significant..
- Retail Sales - Retail sales
Definition: indicator of change in retail sales.
Market influence (A-F): A-
A source: Census Bureau of the Department of Commerce (The Census Bureau of the Department of Commerce).
Exit time: usually on the thirteenth of every month at 8:30 a.m. AND (data for the previous month).
The retail sales statement is a measure of total revenue, obtained as a result of sales. The most important part of this report is the percentage change in sales of consumer goods.. When calculating GDP, Retail sales takes two / thirds of the total volume. Changes in Retail sales are a timely indicator of consumer spending. When summarizing retail sales results for the share of durable goods (from cars to household goods), accounts for about 40% from consumer spending and about 60% for the share of non-durable goods. It should also be taken into account, that changes in sales are more often the result of changes in food and vehicle fuel prices, rather than the level of consumer demand. There are two significant shortcomings in the Retail sales report: the first can be attributed to the difficulty in forecasting, associated with high volatility, as a result of which advance messages are subject to rather large corrections; and the second is the absence in the calculation of service costs, which account for more than half of total consumption. The full picture can only be presented two weeks after the release of Тhe personal income and consumption reports.. As for the behavior of analysts and investors, then, due to the high volatility of this economic indicator, their attention is rather attracted by the trend line, rather than changes in Retail sales results. The degree of market influence is high. The increase in indicators stimulates the stock market to grow, and the bond market falls.
- Retail Sales ех-аuto(International Trade) - Retail sales (international trade)
Definition: indicator of changes in the volume of export-import in the total trade balance.
Market influence (A-F): C +
A source: Census Bureau and Bureau of Economic Analysis, Department of Commerce (The Census Bureau and the Bureau of Economic Analysis of the Department of Commerce).
Exit time: usually on the twentieth of every month at 8:30 a.m. AND (data for the previous two months).
The release of the Trade Bulletin on the results of export-import operations is the most anticipated for summing up the total trade balance. Groups of goods are subject to research, included in the list of export-import goods and services. Export data on a case-by-case basis are important for identifying characteristics, contributing to the competitiveness of the country's economy. Imports meet the needs of the domestic market, but the increase in imports indicates the strengthening of the economies of other countries and slows down, thereby, development of the economy within the country. Volatility in the monthly trade balance can play an important role in GDP forecasts. Net exports are a relatively volatile component of GDP, therefore the issue of the Trade Bulletin helps to clearly establish the quarterly volumes of export operations.
- Tradе Balance – Торговый баланс
Definition: the ratio between the volume of US exports and imports.
Market influence (A-F): C+
A source: Bureau of Statistics and Economic Analysis, US Department of Commerce (The Census Bureau and the Bureau of Economic Analysis of the Department of Commerce).
Exit time: usually the twentieth of the month at 8:30 a.m. AND (data for the previous two months).
The trade report is the most widely used indicator in the general trade balance. The volume of export-import operations and the service sector are subject to research.. Indicators of export volumes in a particular case are important, because they reflect the presence of signs of the increasing competitiveness of their own exporters and the presence of signs of strengthening of economies abroad, what gives an impetus to the growth of the US economy. Imports reflect the needs of the domestic market, but a serious delay in the release of The trade report relative to other consumption indicators does not have a serious impact on the market. The market reaction depends on the relevance for the economy of the results of the trade balance at the moment. It should be noted, that the volatility of monthly trade balance indicators can play an important role in forecasting GDP. This happens because, that the volume of exports is deducted from GDP, and the volume of imports is added to it. With a decrease in the US trade deficit due to an increase in export operations, the need for national currency increases, what stimulates the stock market to grow, but bonds – to fall.
- Treasury Budget – Бюджет Казначейства
Definition: monthly fluctuation rate of the treasury budget.
Market influence (A-F): D
A source: U.S. Department of the Treasury (U.S. Treasury Department).
Exit time: usually the third week of the month in 2:00 p.m. AND (data for the previous month).
Treasury Budget's monthly metric follows strong seasonal fluctuations in deficit. These fluctuations provide us with some information for building a clear trend line in budget policy.. Many analysts, especially that part of them, which makes forecasts for market behavior, focus on annual performance, already adjusted based on weekly and monthly indicators. Most Important Month for Treasury Tax Inflows – April. Indicators can be predicted with utmost precision, using weekly and monthly data, cited in the Ministry of Finance Report.
- Wholesale Trade - Wholesale Trade
Definition: indicator of monthly fluctuations in wholesale trade
Market influence (A-F): D-
A source: Bureau of Statistics of the Ministry of Commerce (The Census Bureau of the Department of Commerce).
Exit time: usually the fifth working day of the month at 10:00 a.m. AND (data for the previous two months).
Wholesale Trade report includes sales data and inventory statistics (Wholesale Inventories) from the second stage of the production process. In view of the, that sales data are unable to account for individual consumption, they do not have a noticeable impact on the market. Sometimes the fluctuations in Wholesale Inventories are sufficient to change the aggregate inventory profile. Total inventories means: • the total number of inventories in production; • wholesale; • level of retail trade In aggregate, data can influence the overall picture of GDP (GDP). In this case, they can cause a slight change in the stock price in the market. Often, Nevertheless, this report goes unnoticed, and is of interest exclusively to economists.
- Help – Wanted Index - Job advertisements
Definition: the rate of monthly changes in the number of ads, job offers.
Market influence (A-F): D-
A source: US Department of Employment (U.S. Department of Labor).
Exit time: usually the last Thursday of the month at 10:00 a.m. AND (data for the previous month).
Reporting indicators for Help – Wanted Index includes data on 51 newspaper across the country, who post employers' ads on their pages, job offers. Help – The Wanted Index is a key barometer of the US labor market. Nine regions of the country publish the results of their research, then they are summed up, and as a result, the total indicator is displayed as a percentage. IN 1987 year, the index is based on the value 100. Help – The Wanted Index rarely has an impact on the market, except for those rare cases, when the country's economy is on the rise, and there is a need for new jobs. If earlier newspapers and magazines served as a source for obtaining information from employers, the role of the Internet has increased today, which significantly reduced the value and reliability of Help – Wanted Index
P.S. The economic news calendar can be found on the website: . Further on the links:Stock Research, Economic.
