April is full of economic activity: finally we're out of the winter doldrums and it's just before many people follow the old adage to "sell in May and go away." April's macro announcements significantly drive prices of the U.S. equities. This article examines market-wide events that have the highest likelihood of influencing domestic securities.
The five macroeconomic announcements that are most likely to move U.S. stocks based on quant analysis are:
• April 12, 2011: International Trade, Trade Balance Level
• April 13, 2011: Retail Sales, Retail Sales less autos - M/M change
• April 15, 2011: Consumer Price Index, CPI - M/M change
• April 15, 2011: Consumer Price Index, CPI less food & energy
• April 26, 2011: Consumer Confidence, Consumer Confidence - Level
The figures for International Trade Balance are due on April 12, 2011, at 8:30 AM ET. Tracked by the Bureau of the Census at the U.S. Department of Commerce, the figures track imports and exports of goods and services entering and leaving the United States every month. The trade balance is really the change in trade deficit, the dollar amount by which the imports into the U.S. exceed U.S. exports. The monthly rise in the trade balance indicates a comparative weakness of the U.S. manufacturing and has a negative influence on many U.S. stocks sensitive to cheap imports. For example, a +1% change in trade balance persistently lowers returns on companies like Gap, Inc. (symbol: GPS), Estee Lauder (EL), and Harley-Davidson (HOG), with probability of at least 95%.
Retail Sales figures are to be released on April 13, also at 8:30 AM. Interestingly, it is the monthly change in Retail Sales less autos, not just in Retail Sales, that significantly drives the markets. The Retail Sales figures tend to be difficult to forecast, and, as a result, the actual figures announced significantly move the markets. Also released by the Bureau of the Census, the Retail Sales count receipts from stores selling durable and non-durable goods, as well as purchases made online. A rise in the Retail Sales is viewed as an increase in consumer confidence, and signifies good prospects for a wide range of firms. In particular, rising Retail Sales tend to buoy Royal Caribbean Cruises Ltd. (RCL), the retail giant Macy's (M), and Autodesk (ADSK).
Monthly changes in Consumer Price Index (CPI) figures are also key movers of April markets. The CPI figures are due on April 15 at 8:30 AM ET. An increase in CPI tends to depress consumer staples, consumer discretionary, utilities, and industrials. Real estate and related sectors tend to rise in response to CPI hikes. CPI figures are released by the Bureau of Labor Statistics at the U.S. Department of Labor.
Last, but not least, Consumer Confidence numbers, out of April 26, 2011, at 10:00 AM ET, are bound to shake many securities. In particular, a boost in Consumer Confidence is a boon for Retail, Consumer Discretionary, and Technology companies, like Yahoo (YHOO) and Visa Inc. (V).
The events discussed here affect returns of hundreds of large-cap and small-cap companies, sometimes by as much as several percentage points. The effects of macro announcements are significant enough to warrant close attention.