Introduction to Market Reactions
The release of economic reports can have a significant impact on market reactions, particularly in the labor market. The data from these reports can influence interest rates, unemployment rates, and average hourly earnings, leading to fluctuations in trading volumes.
Labor Market Data Impact
In the minute after the reports’ releases, surprises in related labor market data, such as the unemployment rate and average hourly earnings, also produced strong impacts on interest rate volumes. For example, initial jobless claims ranging from 80,000 to 145,000 resulted in additional futures volumes for a one standard deviation miss from consensus. However, the impact on options volumes during the first minute after the releases was typically much smaller.
Retail Sales Influence
Retail sales have been the second most influential piece of data after the employment numbers. A one standard deviation surprise versus forecasts on retail sales typically produced an additional 80,000 contracts of futures volume in the minute after release. This highlights the significance of retail sales data in determining market trends.
Inflation Data Reaction
Despite the post-pandemic surge in inflation, market reactions to surprises in CPI, core CPI, and PPI were more muted. These reports added only 20,000 to 30,000 contracts to the futures trading volume within a minute of their release. Furthermore, they tended to have a mixed and negligible immediate impact upon options volumes.
FOMC Policy Announcements
Recognizing that FOMC policy announcements can significantly influence trading activity, it’s essential to account for these days. Interest rate options daily trading volume is, on average, 1,747,832 contracts higher on FOMC announcement days compared to non-FOMC days. This demonstrates the substantial impact of FOMC policy announcements on market trends.
Conclusion
In conclusion, the release of economic reports has a significant impact on market reactions, particularly in the labor market and retail sales. While inflation data reactions were more muted, FOMC policy announcements have a substantial influence on trading activity. Understanding these market trends can help investors and traders make informed decisions, highlighting the importance of staying up-to-date with the latest economic reports and data releases.
