Stock Market

What is Nonfarm Payrolls (NFP)? – Complete Guide for Traders and Investors

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Non-Farm Payrolls (NFP) is a key U.S. jobs report released monthly by the Bureau of Labor Statistics. It shows how many jobs were added or lost, excluding farm workers, government, and a few sectors.

Nonfarm Payrolls (NFP) are a monthly U.S. jobs statistic reported by the Bureau of Labor Statistics (BLS).

Think of NFP as the monthly “jobs pulse” of the U.S. economy.

The report tracks the change in the number of employees on non-farm business and government payrolls, making it one of the most watched indicators of economic momentum and labor-market health.

It is released 12 times a year, usually at 8:30 a.m. ET on the first Friday of the month.

Because of its importance, NFP often moves stocks, bonds, the U.S. dollar, gold, and even crypto, as it shapes expectations for Federal Reserve policy and overall growth.

The U.S. Nonfarm Payrolls (NFP) figure measures how many jobs were added or lost in the economy, but it excludes:

  • Agricultural employment
  • Private household workers
  • Non-profit employees
  • Self-employed or sole proprietors
  • Active-duty military personnel

NFP is part of the larger Employment Situation report, which is released every month in the U.S.

This report is built from two different surveys.

  • The first is called the establishment survey, which collects data from businesses to measure how many jobs were added or lost across different industries.
  • The second is called the household survey, which asks individuals about their employment status, such as whether they are working, unemployed, or looking for a job.

Together, these surveys give a complete picture of the job market from both the employer’s side and the worker’s side.

What Does NFP Show?

Nonfarm Payrolls (NFP) is a report that tells us about the health of the U.S. job market.

It shows the headline payroll change, which is the number of jobs added or lost in the U.S. during the month, excluding farm jobs. It counts workers in industries like manufacturing, services, and construction.

If the number is positive, more people got jobs; if negative, jobs were lost.

The report also shows the unemployment rate and average hourly earnings. The unemployment rate tells us the percentage of people who want a job but don’t have one. Average hourly earnings show how much people are earning per hour on average, and rising wages can signal that inflation may increase.

Why Do Markets Care About NFP?

The NFP report can quickly change expectations for U.S. economic growth and interest rates.

Because of this, it affects many markets around the world, including the U.S. dollar, government bond yields, stocks, and commodities.

For example, if the NFP report is weaker than expected, it can increase bets on Federal Reserve rate cuts. On the other hand, a stronger report may support rate hikes or delay cuts. Both situations can cause sharp price movements in markets during the day.

NFP and Its Impact on U.S. Sectors

Some U.S. sectors are more sensitive to NFP surprises because they are closely tied to interest rates and economic cycles.

Cyclical and rate-sensitive sectors, such as technology, consumer discretionary, and real estate, often react the most. This is because changes in interest rates affect the cost of borrowing and the discounting of future earnings, which directly impacts their valuations.

Financials also move in response to shifts in interest rate expectations and the outlook for banks’ net interest margins.

Industrials and materials tend to react to the overall economic momentum indicated by jobs data, since stronger employment can signal higher demand for goods and services.

Defensive sectors, like utilities and healthcare, usually experience steadier demand. These sectors may become more attractive when NFP data is weak, as slower growth encourages investors to seek safer investments.

Global Ripple Effects

Because NFP affects expectations for U.S. economic growth and Federal Reserve policy, it creates ripple effects in markets around the world.

Currency values often move through changes in the U.S. dollar, while bond yields can shift in other countries. Stocks and commodities also react based on global risk appetite.

International markets frequently respond in a similar way, as changes in global funding conditions and movements in the trade-weighted dollar transmit NFP impacts across different assets and regions.

Gold and NFP

Gold is very sensitive to changes in the U.S. dollar and real yields.

  • When the NFP report is strong, it usually strengthens the dollar and increases yields, which tends to push gold prices lower.
  • On the other hand, if the NFP report is weak, the dollar and yields often weaken, which can lead to higher gold prices.

Traders also pay close attention to wage growth and any revisions in previous data. Weak labor numbers or signals of a more dovish Federal Reserve policy often encourage gold buying, as investors look for a safe haven that does not yield interest.

Crypto and NFP

Cryptocurrencies tend to act like high-risk assets, meaning they react more sharply to changes in liquidity and U.S. dollar trends.

  • When NFP data is weaker than expected, it may suggest easier Fed policy, which can help crypto prices rise.
  • Conversely, a stronger-than-expected report could point to tighter monetary policy, which can make it harder for crypto prices to go up.

However, crypto reactions can be unpredictable. Even after a major payroll surprise, Bitcoin and other tokens sometimes move very little or become extremely volatile, reflecting the unique trading behavior of digital assets.

How the Fed Uses NFP for Inflation Decisions?

The Federal Reserve does not directly control inflation, but it uses interest rates to keep a balance between maximum employment and stable prices.

NFP data plays an important role in this process because it provides insights into both jobs and wages.

Wage growth, measured through average hourly earnings, is especially important.

  • When wages rise quickly, it creates more pressure on inflation, which can lead the Fed to tighten policy by raising interest rates or slowing down cuts.
  • On the other hand, when wages grow more slowly, inflation pressure eases, and the Fed has more room to lower rates or keep policy steady.

In simple terms, if the NFP report is strong, the Fed is more likely to raise rates or hold off on cuts. If the report is weak, the Fed is more likely to cut rates or leave them unchanged.

This article is for informational purposes only and should not be considered financial advice. Investing in stocks, cryptocurrencies, or other assets involves risks, including the potential loss of principal. Always conduct your own research or consult a qualified financial advisor before making investment decisions. The author and publisher are not responsible for any financial losses incurred from actions based on this article. While efforts have been made to ensure accuracy, economic data and market conditions can change rapidly. The author and publisher do not guarantee the completeness or accuracy of the information and are not liable for any errors or omissions. Always verify data with primary sources before making decisions.

The Job Market – A Pillar of U.S. Economic Strength

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The U.S. labor market shows the balance between employers hiring and people looking for jobs. It reflects employment levels, wages, and economic health, with key reports like Nonfarm Payrolls and unemployment data guiding businesses, policymakers, and investors.

The job market, also known as the labor market, is one of the most important foundations of any economy.

In the United States, it is often described as a pillar of economic strength because the ability of people to find jobs and earn wages fuels spending, investment, and overall growth. Their spending has long been the engine behind the world’s largest economy, making the health of the labor market a critical measure of U.S. prosperity.

The job market is not a physical place but a way of describing how employers looking for workers interact with people seeking employment. It represents the balance between the demand for labor and the supply of workers in an economy.

  • When more jobs are available, the labor market is described as strong or tight.
  • When unemployment rises and hiring slows, the market is said to be weakening.

This simple interaction is closely tied to other economic indicators, especially the unemployment rate.

How the Job Market Works?

The mechanics of the labor market are similar to other markets.

Workers provide the supply, while employers represent the demand.

Wages function as the “price” that balances the two sides. If employers need more workers than are available, wages tend to rise. If there are more workers available than jobs, wage growth slows and hiring weakens.

This constant adjustment explains why the job market is both a measure of current conditions and a signal of where the economy may be headed.

The Role of the Bureau of Labor Statistics (BLS)

In the United States, the Bureau of Labor Statistics is the main government agency that tracks and reports on the job market.

Each month, it publishes the Employment Situation Report, which is widely followed by businesses, policymakers, and financial markets.

This report is based on two surveys.

The first, called the Household Survey or Current Population Survey, provides the unemployment rate and other measures such as labor force participation.

The second, called the Establishment Survey or Current Employment Statistics, counts payroll jobs and shows how many jobs were added or lost in different industries. Together, these surveys give the most complete picture of how the American labor market is performing.

The unemployment rate in particular is one of the most recognized figures. It measures the percentage of people in the labor force who do not have a job but are actively seeking one. Because it reflects slack or tightness in the labor market, the unemployment rate plays a central role in judging economic health.

Strong vs. Weak Job Market

A strong job market occurs when unemployment is low, many jobs are available, and wages are rising. This creates a positive cycle where higher wages increase spending, supporting businesses and economic growth.

A weak job market happens when unemployment rises, fewer jobs are available, and wage growth slows. In this situation, workers have less bargaining power, and businesses may be more cautious about hiring or investing.

The Job Market, Inflation, and the Federal Reserve

The U.S. labor market is closely tied to inflation and interest rate policy.

A tight job market often leads to higher wages, which can push up prices across the economy. To prevent inflation from rising too quickly, the Federal Reserve may raise or hold interest rates, cooling demand.

Conversely, a weakening job market, where unemployment rises and wage growth slows, usually reduces inflation pressure. This gives the Fed more room to cut rates in order to support growth and stabilize employment.

Key Indicators of the Job Market

The condition of the labor market is measured through several important indicators.

  • The unemployment rate remains the most visible measure of slack or tightness.
  • Nonfarm payrolls, which track how many jobs are created or lost each month, provide a direct sense of hiring momentum.
  • Job openings, tracked through the JOLTS report, show how many positions employers are trying to fill and how competitive the market is.
  • Wage growth signals the bargaining power of workers and potential inflation risks.
  • Finally, the labor force participation rate reveals how many people are actively engaged in the labor market, either by working or by seeking employment.

Why the Job Market Matters?

The job market has far-reaching effects.

For businesses, labor market conditions guide decisions about hiring, wages, and investment.

For policymakers, job data influences decisions about interest rates and fiscal policies.

For workers and households, it affects career opportunities, wage prospects, and financial security. Because consumer spending is the largest driver of the U.S. economy, the labor market’s health directly shapes the strength of economic growth.

This article is for informational purposes only and should not be considered financial advice. Investing in stocks, cryptocurrencies, or other assets involves risks, including the potential loss of principal. Always conduct your own research or consult a qualified financial advisor before making investment decisions. The author and publisher are not responsible for any financial losses incurred from actions based on this article. While efforts have been made to ensure accuracy, economic data and market conditions can change rapidly. The author and publisher do not guarantee the completeness or accuracy of the information and are not liable for any errors or omissions. Always verify data with primary sources before making decisions.

How does the stock price go up when the company goes up?

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Company goes up, stock price goes up - how does that work?

As Jeff Bezos, the founder of Amazon, once said

“The company is not the stock, and the stock is not the company.”

This means that a company’s actual business and its stock price may seem related, but they are not always the same. They are connected, but not equal.

Let’s break this down in simple terms.

IPO vs Stock Market – What’s the Difference?

When a company offers its shares to the public for the first time, it’s called an IPO or Initial Public Offering. This happens in the primary market.

Here, the company directly receives money from investors. In return, investors get ownership in the form of shares. This is how the company raises capital to fund its business.

But once the IPO is over and the company is listed on a stock exchange like NSE, BSE, NASDAQ, or NYSE, any shares you buy are usually from other investors – not the company itself. This buying and selling happens in the secondary market.

So, in the stock market, you are mostly trading ownership with other people, not giving money to the company.

What Makes the Stock Price Go Up or Down?

After the IPO, the company’s stock price is driven by investor demand. This demand depends on how investors feel about the company’s performance and future potential.

If a company is:

  • Making good profits
  • Launching new products
  • Expanding into new markets
  • Managing its operations well

Then more people want to buy its shares, and the stock price usually goes up.

On the other hand, if the company is:

  • Facing losses
  • Losing market share
  • Involved in controversy
  • Or showing weak future prospects

Then investors may sell their shares, and the stock price falls.

This is why a company’s real-world success or failure affects how people value its shares in the market.

Important to Remember

A company’s stock price reaching zero does not always mean the company is bankrupt. It may just mean investors have lost confidence in its future.

Similarly, a stock trading at five hundred rupees or dollars does not always mean the company is truly worth that much. It could be due to hype, speculation, or unrealistic expectations.

A Simple Analogy – Student and Teacher

Think of a company as a student, and the investors as teachers.

Just like teachers give marks based on a student’s performance, investors assign a stock price based on the company’s financial health and future potential.

  • If the company performs well, investors give it a higher “mark” in the form of a rising stock price.
  • If the performance is poor or uncertain, the price drops—just like getting lower marks.

Also Read – Understanding the Basics of Buying, Selling, and Stop Hunting in Financial Markets

This article is for informational purposes only and should not be considered financial advice. Investing in stocks, cryptocurrencies, or other assets involves risks, including the potential loss of principal. Always conduct your own research or consult a qualified financial advisor before making investment decisions. The author and publisher are not responsible for any financial losses incurred from actions based on this article. While efforts have been made to ensure accuracy, economic data and market conditions can change rapidly. The author and publisher do not guarantee the completeness or accuracy of the information and are not liable for any errors or omissions. Always verify data with primary sources before making decisions.

Important Margin-Related Terms in Indian Stock Market That You Must Know

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Complete Guide to Margin in the Indian Stock Market – Understand SPAN, Exposure, Initial, Peak, and Other Important Margins in Simple Words

Margin is the money or securities you must deposit to take or hold a position in the stock market, especially in the futures and options (F&O) segment. It is not the full value of the trade, but a fraction of it. This allows traders to use leverage, meaning they can take larger positions using a smaller capital base.

  • Margin is the money you put upfront to take a trade. Think of it as your security deposit.
  • Leverage is the additional buying power that your broker provides based on the margin you maintain. It’s like a loan that lets you control larger trades with less money.

Types of Margins in Indian Capital Markets

1. SPAN Margin (Standard Portfolio Analysis of Risk)

SPAN margin is the minimum margin required to cover expected losses from a one-day move in your position. It is calculated by the exchange using a risk-based system. It varies based on the risk and volatility of each contract.

Example: If you buy 1 lot of NIFTY futures, the SPAN margin may be ₹50,000. This value is not fixed and may change with volatility.

2. Exposure Margin

This is charged over and above SPAN to cover unexpected or extreme market movements. It serves as an additional buffer against market risk.

Example: If the SPAN is ₹50,000 and the exposure margin is ₹30,000, you need ₹80,000 in total to initiate the trade.

3. Total Initial Margin

This is the sum of SPAN Margin and Exposure Margin. You must have this total amount in your account before taking an F&O position.

Formula: Total Initial Margin = SPAN Margin + Exposure Margin

4. Premium Margin (for Options Buyers)

When buying options, you don’t need to maintain SPAN or exposure margin. You only pay the full premium upfront, which is called the premium margin.

Example: If a call option has a premium of ₹200 and the lot size is 50, your premium margin would be ₹10,000.

5. Mark to Market (MTM) Margin

MTM margin represents the daily gain or loss based on the difference between your entry price and the day’s closing price.

This margin is applicable to futures and also to short (sold) options positions. However, options buyers don’t face daily MTM charges, as their maximum loss is limited to the premium paid.

Example: If you buy NIFTY futures at ₹20,000 and it closes at ₹19,950, you lose ₹50 per unit. This loss is debited from your account that day.

6. Additional Margin

SEBI or exchanges may impose additional margins during volatile market conditions or special events. This is a temporary measure but mandatory when applied.

Example: During events like Union Budget or elections, an additional 10% margin may be imposed to curb speculation.

7. Special Margin

This is imposed on specific stocks or segments that show unusual price or volume movements. It aims to control speculative activity or price manipulation in that particular stock.

Example: If a small-cap stock suddenly rises 70–80% in a few sessions without fundamental news, a special margin may be applied.

8. Maintenance Margin

After taking a position, this is the minimum balance that you must maintain in your account. If your margin balance falls below this level, you will get a margin call to deposit more funds.

9. Margin Shortfall

This occurs when you fail to maintain the required margins (initial and MTM). A margin shortfall may lead to penalties, interest charges, or forced closure of your positions by the broker.

10. Delivery Margin

For F&O contracts that result in physical delivery, exchanges may require an extra delivery margin near expiry. This ensures that both buyer and seller are capable of fulfilling the delivery obligation.

11. Peak Margin

Introduced by SEBI in 2021, peak margin is the highest margin requirement at any point during the trading day. Brokers must collect this maximum margin from clients, reducing the ability to offer excessive intraday leverage.

12. Intraday Margin

Earlier, brokers offered high intraday leverage for trades that were squared off within the day. But under SEBI’s peak margin framework, this is now restricted. Brokers can no longer offer excessively low intraday margins unless the client has funded the position sufficiently.

13. VaR Margin (Value at Risk)

This applies to the cash (equity) segment and represents the margin needed to protect against losses in 99% of trading scenarios. Stocks with higher volatility attract higher VaR margins.

14. ELM (Extreme Loss Margin)

Also applicable in the cash segment, ELM covers rare or extreme events that go beyond the VaR calculation. Exchanges collect both VaR and ELM together.

Total margin in the cash segment = VaR Margin + ELM

15. Pledged Margin

If you don’t have enough cash, you can pledge your shares to generate margin. This is called Margin Against Shares (MAS). However, a haircut is applied to the pledged value, meaning you don’t receive 100% of the value as usable margin.

Example: If you pledge ₹1,00,000 worth of shares and the haircut is 20%, you will get ₹80,000 as usable margin.

Summary Table

Type of MarginApplies ToPurpose
SPAN MarginF&OCovers expected daily market risk
Exposure MarginF&OExtra buffer for unexpected moves
Total Initial MarginF&OSPAN + Exposure
Premium MarginOptions BuyerFull premium payment only
MTM MarginFutures, Short OptionsDaily settlement of gains/losses
Additional MarginAllExtra margin in volatile situations
Special MarginAllStock-specific speculative control
Maintenance MarginAllMinimum balance to hold positions
Margin ShortfallAllWhen margin requirement is unmet
Delivery MarginF&OFor physical delivery contracts
Peak MarginAllMax margin during the day
Intraday MarginIntraday TradesShort-term trades (restricted now)
VaR MarginCash SegmentRisk margin based on price movement
ELMCash SegmentExtra buffer for rare price swings
Pledged MarginF&OMargin from pledged shares

This article is for informational purposes only and should not be considered financial advice. Investing in stocks, cryptocurrencies, or other assets involves risks, including the potential loss of principal. Always conduct your own research or consult a qualified financial advisor before making investment decisions. The author and publisher are not responsible for any financial losses incurred from actions based on this article. While efforts have been made to ensure accuracy, economic data and market conditions can change rapidly. The author and publisher do not guarantee the completeness or accuracy of the information and are not liable for any errors or omissions. Always verify data with primary sources before making decisions.

6 Main Methods a Company Can Issue Shares

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To grow their operations, expand into new markets, or develop new products, companies often need additional capital. One of the primary ways they raise this capital is by issuing shares. Depending on their financial goals and legal structure, companies have multiple methods available to issue these shares. Each method has its own rules, process, and audience.

This article explains the six main methods through which companies can issue shares, written in simple and clear language.

1. Public Issue (IPO and FPO)

A public issue is the most common and widely recognized method of issuing shares. In this method, the company offers its shares to the general public through a stock exchange.

When a company offers its shares to the public for the first time, it is known as an Initial Public Offering or IPO.

If the company is already listed and decides to issue more shares to raise additional capital, it is called a Follow-on Public Offer or FPO.

Companies choose this route when they want to raise a large amount of capital and get listed on the stock exchange. Public issues are strictly regulated by government bodies like SEBI in India or the SEC in the United States to ensure transparency and investor protection.

2. Private Placement

Private placement is a method where a company issues its shares to a selected group of investors rather than to the general public. These investors may include banks, mutual funds, venture capital firms, or high-net-worth individuals. This method is faster and involves less regulatory compliance than a public issue, making it an attractive option for companies that need quick funding.

In India, the number of investors in a private placement is legally restricted to not more than 200 in a financial year. Companies usually choose this method when they want to raise funds efficiently without the delays and costs associated with public offerings.

For example, MSEI is planning to raise ₹1,000 crore by issuing 500 crore shares through private placement.

3. Rights Issue

In a rights issue, the company offers new shares to its existing shareholders in proportion to the number of shares they already own. This means that if a shareholder owns 100 shares, and the company announces a 1:5 rights issue, they have the right to buy 20 additional shares.

The shares are usually offered at a discounted price to encourage existing shareholders to invest more in the company. This method allows companies to raise additional funds while ensuring that control and ownership remain with the current investors. It is a fair and transparent method to raise capital without diluting existing ownership too much. Many companies prefer this method during expansion or restructuring phases.

4. Bonus Issue

A bonus issue is a method where the company issues additional shares to existing shareholders without charging them anything. These shares are given free of cost and are usually issued from the company’s accumulated reserves or retained earnings. The bonus shares are distributed in a specific ratio, such as one bonus share for every two shares held.

Although no fresh capital is raised through a bonus issue, it serves as a way to reward existing shareholders and increase the total number of shares in the market. This can also improve the stock’s liquidity, making it more attractive to small investors.

For instance, if a company announces a 2:1 bonus issue, shareholders will receive one extra share for every two shares they already hold.

5. ESOP and Sweat Equity

Companies often offer shares to employees and key personnel through methods like the Employee Stock Option Plan (ESOP) or sweat equity. In an ESOP, employees are given the option to purchase shares of the company at a fixed price after a certain period. This serves as a long-term incentive and helps retain talented employees.

Sweat equity refers to shares issued to employees or directors in return for their contribution in the form of skills, expertise, or intellectual property rather than cash. These methods not only build employee loyalty but also align their interests with the company’s long-term growth.

Many startups use ESOPs to attract and motivate top talent when they are unable to offer high salaries.

6. Preferential Allotment

Preferential allotment is a method in which shares are issued to a specific group of individuals or institutions at a pre-agreed price. Unlike private placement, which is limited in number, preferential allotment is often used for strategic purposes such as mergers, acquisitions, or raising capital from known investors.

This method requires approval from shareholders through a special resolution and follows regulatory procedures to ensure transparency. Companies prefer preferential allotment when they want to bring in strategic partners or promoters without going through the lengthy process of a public issue.

For instance, a company might issue shares to a private equity firm as part of a strategic alliance

This article is for informational purposes only and should not be considered financial advice. Investing in stocks, cryptocurrencies, or other assets involves risks, including the potential loss of principal. Always conduct your own research or consult a qualified financial advisor before making investment decisions. The author and publisher are not responsible for any financial losses incurred from actions based on this article. While efforts have been made to ensure accuracy, economic data and market conditions can change rapidly. The author and publisher do not guarantee the completeness or accuracy of the information and are not liable for any errors or omissions. Always verify data with primary sources before making decisions.

CPI Explained – A Beginner’s Guide

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Inflation is something we hear about almost every day in the news. To measure this inflation, economists use an important tool called the CPI.

If you are new to finance or trading, CPI is one of the first concepts you should understand.

What is the meaning of Inflation?

When the cost of basic goods that we buy every day- like food, clothes, and other essentials-rises over time, this situation is called inflation.

Inflation causes reduction in the purchasing power of money. When prices go up, the value of money decreases. This means that you can buy less with the same amount of money.

For example, if inflation is high, something that used to cost $100 might now cost $110.

This reduction in the purchasing power of money is what we call inflation.

  • Inflation is measured using the CPI.

What is CPI?

The full form of CPI is Consumer Price Index. It measures how much the prices of goods and services that households usually buy have changed over time.

The CPI is like a basket that contains a variety of basic goods and services that a typical household needs, such as food, clothing, and healthcare. By tracking the price changes of these items over time, we can calculate the inflation rate.

Why is CPI Important?

CPI is not just a number. It tells us how the cost of living is changing. Here are some reasons why CPI is important:

  • For Households: It shows how much more expensive daily life is becoming.
  • For Businesses: Rising CPI means higher costs for raw materials and services.
  • For Governments: Policymakers, especially the central bank (like the Federal Reserve in the US), use CPI to make decisions about interest rates.
  • For Investors and Traders: CPI can move markets. A higher-than-expected CPI can push stock markets down and strengthen the US dollar, while a lower CPI can have the opposite effect.

How is CPI Calculated?

The calculation may sound complex, but the idea is simple.

  1. A fixed basket of goods and services is chosen.
  2. Prices of these items are collected every month.
  3. The average change in these prices is calculated.

If the CPI goes up, it means inflation is rising. If it goes down, it means inflation is easing.

Imagine last year you spent $1,000 on rent, groceries, gas, and clothes combined. This year, buying the same things costs you $1,050. That extra $50 means prices rose by 5%. CPI is the tool that captures this increase in prices and reports it as the inflation rate.

Types of CPI

There are two main types of CPI:

  1. Headline CPI: This includes everything in the basket – food, fuel, rent, healthcare, and more. But food and fuel prices can jump up and down quickly, which sometimes makes headline CPI volatile.
  2. Core CPI: This excludes food and fuel prices because they change too often. Economists use core CPI to get a clearer picture of long-term inflation trends.

What is Inflation Rate?

It is the percentage change in the price level of goods and services over a period of time. It’s like a report card that tells us how much prices have gone up or down. For example, if the CPI was 100 last year and it is 105 this year, the inflation rate would be 5%.

How Inflation Rate Affects Stock Market?

Inflation can have a significant impact on the stock market.

When inflation is high, the cost of living increases, and people may spend less money on non-essential items. This can affect companies’ profits, which may cause their stock prices to fall.

Also Read – What is an IPO in Simple Words? – 6 Important Steps to Know

On the other hand, some companies may benefit from inflation if they can pass on the higher costs to consumers by raising prices.

What is Deflation?

Deflation is the opposite of inflation. It occurs when the prices of goods and services decrease over time. While this might sound good, deflation can be harmful to the economy. When prices drop, people may delay purchases, hoping for even lower prices in the future. This can lead to lower demand, causing companies to reduce production, cut jobs, and even lower wages.

This article is for informational purposes only and should not be considered financial advice. Investing in stocks, cryptocurrencies, or other assets involves risks, including the potential loss of principal. Always conduct your own research or consult a qualified financial advisor before making investment decisions. The author and publisher are not responsible for any financial losses incurred from actions based on this article. While efforts have been made to ensure accuracy, economic data and market conditions can change rapidly. The author and publisher do not guarantee the completeness or accuracy of the information and are not liable for any errors or omissions. Always verify data with primary sources before making decisions.