I\'m so confuse about the current Data for US stock market. can anyone give me a
ID: 1248452 • Letter: I
Question
I'm so confuse about the current Data for US stock market. can anyone give me a hint about the US stock market!!?today Jan 2nd -->ISM Manufacturing Index 60.8, which is higher than expect.
--> most of the definition said "stock should fail" if higher than expect.
--> however, the S&P 500 rise rapidly. why?
also Jan 28th --> US GDP (QoQ) is lower than expect.
--> definition said lower than expect the 'stock should rise'
--> however, the market did not rised by the data at all (only rised by the Fed's stimulation. Why?
basically, most the definition of the data does not match the stock movement these days, how is that happen ???
Explanation / Answer
ISM manufacturing index is an index based on surveys of more than 300 manufacturing firms by the Institute of Supply Management; it monitors employment, production inventories, new orders and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys.
So, a higher index means more orders, more employment, more production and output. Hence an increase in the ISM index means a growth or recovery in economy, which is a positive signal to the markets as it earns higher corporate profits, this speculation of higher profits will make Bull Run in the stock market. In contrast, this rise in ISM index will also trigger the speculation of inflation, which will have its effect on the bond market.
also Jan 28th --> US GDP (QoQ) is lower than expect.
--> definition said lower than expect the 'stock should rise'
--> however, the market did not rised by the data at all (only rised by the Fed's stimulation. Why?
GDP lower than the potential GDP, this gap is called recessionary GDP gap.Here there will be reduced demand, production will be idle and cyclical unemployment. To close the gap, government will stimulate the economy by increasing its spending or decreasing taxes or both.
So, a recessionary GDP gap is a starting point for an expansionary policy, but it will not give an expansion alone, for example, if the country chooses not to give any fiscal stimulus, than the gap will remain as such, and there is a danger that the gap may increase further, pushing economy more deep into the recession.
Lower GDP gap doses not guarantee growth in the economy, it is the government package or policy that stimulates the economy.
So, a government stimulus in the form of spending or tax cut will stimulate the economy or stock market sentiments.
Recessionary GDP Gap ---------> Governt stimulus----------------> economic growth-----> markets will perform well