What moves the markets? Interest rates, inflation, earnings and fear, explained
The five big drivers behind stock index, oil and gold moves, why markets move on surprises rather than news, and what it means for a day trader.
Every day the market goes up or down, and every day someone on TV has a reason why. Most of those reasons fall into a few big buckets. Once you know them, the news stops sounding like noise, and you can tell a normal day from a day when something bigger is going on. This is the first part of a series on how the financial markets work, written for traders who trade index futures, oil and gold.
Prices move when buyers and sellers change their minds
A price is just the last place a buyer and a seller agreed. It moves when one side becomes more eager than the other. Big moves happen when a lot of money changes its mind at once: a pension fund, a bank, thousands of traders all reacting to the same new information. So the real question isn't “why did it go up?” but “what new information changed what people expect?”
The five big drivers
| Driver | What it is | Why it moves prices |
|---|---|---|
| Interest rates | What borrowing costs, set by central banks like the Fed | Higher rates make borrowing more expensive and safe savings more attractive than stocks |
| Inflation | How fast prices are rising | High inflation pushes central banks to keep rates higher for longer |
| Growth and jobs | Whether the economy is expanding | A strong economy means more spending and profits, but can also mean higher rates |
| Company earnings | How much the biggest companies make | Index prices are, in the end, a bet on future profits |
| Fear and confidence | How worried investors are | When fear rises, money leaves risky assets and runs to safe ones |
Each of these gets its own article in this series. The key idea: they're connected. Strong jobs numbers can push stocks *down*, because the market thinks the Fed will keep rates high. That's why the same kind of news can move markets in opposite directions on different days.
Expectations matter more than the news itself
Markets move on surprises, not on news. If everyone expects inflation to come in at 3% and it comes in at 3%, the market may barely move: the price had already “priced it in”. If it comes in at 3.4%, prices can jump in seconds. That's why traders watch the forecast next to every number on the economic calendar. The move comes from the gap between the two.
Scheduled news vs. surprises
- Scheduled: inflation (CPI), jobs (NFP), Fed decisions, big companies' earnings. You know the time in advance, so you can plan around them.
- Unscheduled: a surprise speech, a war, a bank failure, a tweet. You can't plan for these, which is why every trade needs a stop.
What it means for a day trader
- Check the calendar every morning. Know if a big number comes out today and at what time. Write it in your Morning prep plan.
- Expect the first minutes after a big number to be wild. Spreads widen and prices jump. Many traders simply wait until the dust settles.
- Know your prop firm's news rules. Some firms restrict trading right around big releases. See can you trade the news on a prop account?
- Don't fight a big-picture move. On a day the Fed surprises the market, a small pullback setup is fighting a tide.
Next in this series
Next: the Fed and interest rates, the single biggest driver of all. And when you want to see how your own trading holds up on news days, drop your trades into the free trading report card.
This article is for education only and isn't financial advice. Trading futures involves substantial risk of loss.