There's an old saying on Wall Street: "Buy on the rumor; sell on the news." The point of this old chestnut is that the stock market largely moves on anticipation. People make their (sometimes very gaudy) livings by getting into stocks ahead of everyone else. There's a lot of money to be made being early...as long as you're right.
All this is to say that there's a high premium placed on guessing what's going to happen on Wall Street. The underlying driver of action in the stock market is corporate earnings. Shares represent ownership in companies and rise in value as the companies involved make money.
So that gives us the two basic engines of stock trading: guessing stuff...and corporate results. Which leads to the following equation: guessing stuff + corporate results = earnings estimates.
Wall Street banks and brokerages employ a small army of really smart people (known generally as analysts) whose entire jobs involve guessing what companies will report when they announce their results. (Well, sometimes there are conflicts of interest with the companies being covered, so it's not always entirely true that an analyst's sole job involves accurately predicting results. But it's a big part of it anyway, even if they don't always publicly issue their full, unabashed opinions.)
When a company announces its results (See: Earnings Announcement), the stock will largely move based on how the company's reported metrics compare with the estimates going into the release. If the company beats expectations, there's a good chance the stock will rise. If it misses expectations, the stock will likely fall.
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Finance: What is forecasting?8 Views
Finance allah shmoop what is forecasting one better than three
casting Okay so forecasting in a financial sense isn't all
that different from the crazed witchy ramblings of a medium
in a say aunts divine ing your future dating life
not necessarily on tinder which she and tones will be
cloudy with a chance of rejection Our company's forecast future
revenues and profits as driven by sales volumes and usually
and the pricing of whatever products they're moving out the
door Why like why bother Well you sell so many
units of your product what can you do about it
Well in practice there's plenty you can do about it
Let's say you won huge discounts and extruded plastic volumes
for your sneeze guard business The snot thickens any way
at all that you get in return for ordering five
years supply Your supplier loved knowing well in advance what
the demand would be for their extruded plastic so that
it could negotiate with its unions It's plastic mining contracts
its natural gas supplier teo melt the plastic and so
on So in return for a lot of commitment came
a lot of discounting You've now committed to buy five
years worth of extruded plastic supplies no matter what Like
twenty five tons this year thirty tons next thirty five
the next and so on But after year to the
economy softens and buffets have decided to cave to the
germs They aren't just buying enough sneeze guards Toe warrant
your commitment of thirty five tons of extruded plastic Well
what can you dio a cry Yes you always do
that Be wine and blame washington That's a good one
that always works Or see Spend money on marketing and
discounting to just quote get through it unquote So yeah
the answer to see you're on the hook for thirty
five tons no matter what So rather than have it
just pile up in the back of a factory you
lower prices and spend a bit more on marketing And
instead of only needing a twenty seven tons that the
existing market would have had you send out the door
you stimulated demand Five tonnes worth They now have thirty
two tons needed Teo get sent out for snot guards
and yes that three tons less And you really wanted
to sell But it's not terrible You don't go bankrupt
in three tons of plastic fits right here in the
back of the factory yard Thing neither Yeah that stuff
is heavy So through forecasting which letyou know very early
the softness in the market demand for your sneeze guards
you were able to stave off what could have been
a calamitous slow down or even shutdown bankruptcy or whatever
in production Yeah and that's nothing to sneeze at Gross
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What is a whisper number? The rumor mill. The gossip chain. The whisper number is the Wall Street version of those word of mouth speculations. Whis...
