Non farm payroll

Stocks reflects the health of an underlying company, the lifeblood of these companies depend on how deep a pocket it’s target consumers have. Most of the revenues companies get are from folks like me and you, so an increasing quarterly earnings report released by firms at a time when the labor market is experiencing a decline would sound a little odd. Most likely as soon as you hear bad Non-Farm Payroll reports, the S&P 500 would have already been registering a trend heading south. Non-Farm payroll report assesses the current condition of the labor market. An increasing trend in this report indicates that there are more people in the private sector are employed in the economy with cash ready to spend on goods and services which pushes the supply of money faster between firms, leaving a trail of revenues as it wanes across the system

Some firms may not be receiving its revenues directly from consumers lets say an aerospace company such as Boeing which is most likely under contract by the government and its overseas clients such as airliners. Stocks of these companies may get affected indirectly when there is a decline for new aircraft orders from airline companies due to a decrease in air travel demand at a time when the labor market is being liquidated. The effect would be small but looking at the investment portfolio side, when a huge investment firm has to compensate the loss from its stocks that were heavily affected by the labor decline, it would have to liquidate its winning stocks to offset the losses. Therefore if stocks of Walmart (WMT), McDonald’s (MCD) or Apple (AAPL) were hit heavily then Money Managers might have to liquidate steady going stocks of Boeing (BA) to balance its portfolio. Since investment firms hold huge quantities of a certain security, it is enough to pull the price lower when they liquidate. This in effect can be the single unit in the herd that turned around sending a message for others to follow.

Previous | Next

Stocks | Forex | Options | Economics | Bonds | History | Language learning | Technology | Technical Analysis | Fundamental Analysis
Copyright © 2014 econtrader | Risk disclosure | Terms of Use