Every week the Dow Jones Industrial Average (^DJI 1.26%) moves on a number of factors, whether earnings releases, housing or jobs reports, gross domestic product figures, consumer sentiment indexes, or a change in the trade deficit. While earnings reports are the most important for investors, the numerous economic reports published each week can give an investor insight into the health of the economy, which in turn affects the health of the stocks they own.
This past week the blue-chip index increased by 237 points, or 1.47%, and now sits at 16,302. So what caused the move?
On Monday, the National Association of Home Builders revealed that builders' confidence barely increased in March with the index rising from 46 in February to 47. A reading of 50 or better means conditions are improving. Poor weather, a lack of ready-to-build land, and limited skilled labor were again the three reasons builders gave for their pessimism. Nonetheless, the Dow rose 181 points for the day as the fear of military action in Ukraine diminished, after Crimea voted overwhelmingly to secede and join Russia.
On Tuesday, as the situation in Ukraine remained calm, the index rose another 89 points. The consumer price index also indicated that inflation was just 0.1% in February, matching January's rate and coming in below December's 0.2%. The slow and stable increase is a great sign, since the low-interest-rate environment we've been in for the past few years has had the potential to cause massive inflation.
The Dow dropped 114 points on Wednesday, after the Federal Reserve announced that it will continue tapering its asset purchase program that was originally set at $85 billion a month. In April, the Fed plans to buy only $55 billion in assets, down from the $65 billion established at the last Fed meeting. Sluggish economic data has some investors concerned over the move, although others attribute the latest economic doldrums to the winter weather and aren't worried about the Fed's pullback.
Sure enough, data from the Philadelphia Fed on Thursday indicated that the economy is healthy, and the Dow moved 108 points higher on the day. Manufacturing activity has shown improvement in March, and managers in the industry are generally optimistic about the coming months. It could be that bad weather really was the cause of the recent economic downturn.
No major economic news came out on Friday, but the Dow didn't have a quiet day. The index rose by as much as 125 points during midmorning trading, but it started falling after noon ET and closed with a 28-point loss. It could be that Friday was a quadruple witching day, or investors may have just been taking some profits.
Check back tomorrow to see what economic reports will move the Dow this coming week.