An indicator is defined as a statistic used to measure current conditions and forecast financial or economic trends. The key indicators for U.S. stocks are also the major indexes. They are the Dow Jones Industrial Average (DJIA), the S&P 500 Index, and the Nasdaq Composite Index. Meanwhile, the leading economic indicators used by analysts to assess the health and state of the U.S. economy include the gross domestic product (GDP), the consumer price index (CPI), the nonfarm payroll report and the consumer confidence index.
Common Indicators for the U.S. Stock Market
The DJIA also referred to as the Dow, is an average derived from 30 of the top stocks traded on the New York Stock Exchange (NYSE). It is the most highly used and frequently quoted of all the leading stock market indicators.
The S&P 500 Index is made up of 500 stocks that are chosen based on market capitalization, liquidity, and their industry sectors. The S&P 500 is a broad market indicator of U.S. equities. The index is a value-weighted index with each stock's weight proportionate to its market value.
The Nasdaq Composite Index is weighted by the capitalization of the market. It includes more than 3,000 stocks on the Nasdaq Stock Exchange. Included in the index are American depositary receipts, real estate investment trusts, and many small-cap stocks.
Common Indicators for the U.S. Economy
As a key indicator of the state of the economy, GDP measures the price value of all goods and services made in the U.S. Included in the data for this indicator is all of the consumption that occurs in both the public and private sectors. GDP reports are issued quarterly and annually.
CPI is a measure of a weighted average of a mixture of consumer goods and services. The CPI is calculated by using price changes for all items within the selected mix. Changes in price in relation to the cost of living are examined by looking at changes in the CPI.
The monthly nonfarm payroll report is a key employment indicator. It often has a significant impact on equity and forex markets. It also estimates the average workweek and average weekly salaries of non-farm employees. This report does not include employees of the government, self-employed workers, employees of non-profit groups, or farm workers.
Lastly, the consumer confidence index is a closely-watched survey that assesses the optimism or pessimism consumers feel for the economy. This monthly indicator is based on the concept that if consumers are optimistic, they should be expected to purchase more goods and services.