Key indicators: Will momentum in stocks and bonds last?
Must-read preview: Key indicators for the 1st week of September (Part 1 of 11)
Economic indicators this week
Economic indicators measure performance at a macro or overall economy-wide level. They provide valuable data points to investors, signaling the direction the economy is headed in. Growth trends in the economy affect returns on various asset classes, including stocks and bonds. As a result, they can move markets in a significant way, impacting your ETF investments.
How economic indicators impacted popular ETFs in 2014
In recent months, positive manufacturing and labor market indicators have highlighted improvements in the U.S. economy. The S&P 500 Index breached the 2,000 mark for the first time last week. The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 (SPY) track the S&P 500 Index. The Dow has also gained this year, though more moderately. The SPDR Dow Jones Industrial Average ETF (DIA) tracks the Dow Jones Industrial Average.
Economic traction has also spurred business investment in technology, benefiting tech stocks like Microsoft (MSFT) and Cisco (CSCO), which are listed in the Nasdaq-100 Index. The PowerShares QQQ (QQQ) tracks the Nasdaq-100.
Safer bonds, like Treasuries, have benefited from the flight-to-safety trade in 2014. Geopolitical tensions abroad caused an investor flight to safer assets. The iShares 20+ Year Treasury Bond ETF (TLT) is up by almost 19% year-to-date.
This week, a number of indicators are due for release. They should show whether this momentum can continue. We’ll cover major releases in the coming parts of this series.
Labor market indicators releasing this week include two of the most market-moving reports: job addition figures for August (refer to Part 6), released by Automatic Data Processing on Wednesday and the Bureau of Labor Statistics on Friday. Other labor market indicators include Gallup’s job creation index, which will release Wednesday, initial jobless claims, and Gallup’s Payroll-to-Population report (Part 7), both releasing on Thursday.
Manufacturing sector indicators: The Purchasing Managers’ Index (or PMI) by the Institute for Supply Management (Part 3) and Markit Intelligence (Part 4) are releasing on Tuesday, September 2. Motor vehicle sales (Part 8) and factory orders (Part 10) will release the following day.
Construction spending (Part 5) for July will release on Tuesday, September 2.
Services sector indicators like the PMI releases by ISM and Markit (Part 9) will release on Thursday.
Retail indicators impact consumption, the largest GDP component. We’ll cover the weekly ICSC-Goldman Sachs Store Sales and Redbook Indices in Part 11 of this series.
To read about an indicator measuring the daily spending habits of Americans, Gallup’s U.S. consumer spending measure, please move on to the next part of this series.
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