The stock market is a bit like the id in Freud's theories. Pleasure-seeking and pain-avoiding, it reacts first and asks questions later. As a result, regular economic data reports can inspire whoops of enthusiasm or exaggerated despair in stock prices.
Here's a look at some of the economic reports coming out this week that could move the market.
On Tuesday and Wednesday, the Federal Reserve's rate setting committee, the Federal Open Market Committee, will meet to discuss monetary policy and short-term interest rates. On Wednesday, the statement summarizing the meeting will be released.
This meeting is likely to garner a lot of attention due to the addition of a new component to the Summary of Economic Projections. In addition to inflation, gross domestic product, or GDP, and unemployment, a projected path for the federal funds rate will be included for the first time.
Increased transparency from the Fed is thought to have a soothing effect on markets. No further stimulus is expected at this meeting, and the economic data since the last time the FOMC met has strengthened.
Thursday will bring a flood of information that could influence investments; including durable goods orders and initial jobless claims. Last week, we found out that the number of people claiming unemployment benefits for the week of January 14 fell to the lowest level since 2008, around 352,000.
The good news had a buoying effect on the market. Predictions of claims for this week are running higher than last week's, though.
Durable goods orders should be up this week, by a total of 3 percent according to High Frequency Economics' Weekly Notes newsletter.
Excluding transportation orders, the increase is expected to come in around 1 percent, says HFE.
A positive report on durable goods orders indicates that consumers and businesses are willing to make large purchases rather than keeping cash around for a rainy day.
On Friday, we'll get the GDP for the fourth quarter of 2011. The forecast from economists polled by Marketwatch.com is for 3 percent growth over the previous quarter, according to their Economic Calendar.
GDP measures the productivity of the economy and is a lagging indicator. The official release from the Bureau of Economic Analysis can move the stock market if the number is higher or lower than expected. Basically, the report can either affirm or weaken market estimations of economic growth.
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