As traders, it’s important to understand how the overall economy affects the stock market. Start with these three economic data points.

You may have heard a strategist, Federal Reserve official, economist, or pundit on financial news mention “the data”. This generic term can have different meanings, of course. For our purposes, “the data” represents a full picture of the economy.

Stock indexes, like the S&P 500, provide just one data point. There are many others that give us a nice read on where things are. So which ones should we look at?

3 economic data points traders must follow

Company earnings reports

Let’s start with fundamental data: company earnings.

We have seen strong earnings growth in 2026, and that is expected to continue for a couple more quarters. The impressive results act as good support for the market, as valuation continues to move up and the price/earnings (P/E) multiple shrinks or stays the same.

For example, a reasonable price to pay for earnings on the SPX is about 15-19x earnings. Some estimates for 2027 earnings are at $415, which puts the multiple at 18x (based on the current price of the index at 7730). Yet, the current growth rate in earnings is about 26%, so perhaps the stock market is not discounting the forward earnings. This is a key data point.

Jobs reports

Along with earnings we have to be vigilant about the jobs market. Each month, the US Department of Labors releases an estimate called the NFP (non-farm payroll) report. It tells us how many jobs were probably created in the public/private market over the past month. (I say “probably” because these reports are usually adjusted up or down.)

Full employment is essential for an economy to grow. Fortunately, jobs in the US are plentiful, and we have been seeing some of the lowest unemployment rates in our history.

The report includes wage growth, which tells us how much workers are making and if their pay is improving. Wage growth becomes a problem it’s stagnant, but we have not seen that for years.

Inflation

High inflation trends began after the pandemic was declared in 2020, and it remains a major issue today, mostly driven by the Iran War.

Each month, the Bureau of Labor and Statistics releases two reports, one for consumer prices and one for producer prices. These are both important data points.

Further a Personal Consumption Expenditure report is scrutinized by officials, as it shows how strong consumer spending is.

The Federal Reserve relies on all three of these reports to shape monetary policy based on their goals for the economy (inflation below 2% per year, full employment, and moderate interest rates).

Related: 4 Technical Indicators That Can Help Predict Where a Stock Is Headed