Why do earnings and fed activity like CPI Reports and FOMC Meetings impact stock prices so much?
In: Economics
Earnings don’t impact stock prices as much as you think. Analysts have gotten better at predicting earnings.
However, during earnings calls, companies issue forward guidance. This is when they release new information that analysts had no idea about before. New information changes the value of the company moving forward, sometimes dramatically. For example, a company that is expected to grow at a 20% rate YoY is worth way way more than a company expected to grow at a 10% rate.
FOMC meetings impact stock prices because they impact bond prices. When people sell bonds, they usually put that money into stocks. And when people buy bonds, they usually sell stocks in order to get money to do so.
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