After the market's biggest rally since 1974, what to watch in the week ahead


The U.S. stock market just did something it hadn't done in more than 45 years. In the holiday-shortened week, the S&P 500 surged more than 12%, for its biggest rally since 1974. And this gauge now is up nearly 25% from its March low.

That's created a curious situation on Wall Street: Even as coronavirus cases mount, stock prices are rebounding. The stock market is forward-looking, so these gains suggest traders have reason to be optimistic that the outbreak is nearing its peak and that aggressive action from the Federal Reserve and Congress will support the economy.

In the past week, the Federal Reserve unveiled details of $2.3 trillion in programs, including loans to businesses with up to 10,000 employees. Meanwhile, stimulus checks in the amount of up to $1,200 per adult should start arriving soon. And White House advisor Dr. Anthony Fauci said the country should see the "beginning of a turnaround" in the coming week. 

Federal Reserve Chairman Jerome Powell said Thursday that the economic rebound following the coronavirus-induced shutdown "can be robust" despite the sharp downturn. Until then, however, many Americans are reeling. In a three-week period, a record-breaking 16 million-plus people, or about 10% of the workforce, filed for unemployment benefits

News about the coronavirus pandemic will continue to dictate the market's moves for the foreseeable future, and Wall Street will get new details about its impact on corporate America with the start of earnings season. In addition, traders will analyze a monthly report on consumer spending.

Here's what to watch in the stock market during the week ahead — and how the news could affect your bottom line.

Earnings season to give early look at how companies are weathering the pandemic

What's happening: A major theme in April will be the start of earnings season, or the multiweek period when publicly traded companies disclose results for the most-recent quarter. Wall Street is currently bracing for the worst quarter for companies in the S&P 500 since 2009, according to figures compiled by FactSet

Banks dominate the coming week's calendar, with JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America scheduled to release results on Tuesday and Wednesday.

Why it matters: For traders on Wall Street, what happened in the first quarter will be less important than what executives are forecasting for the second quarter and beyond. Specifically, they'll want to hear how these companies are planning to get their business back once some of the health restrictions lift, like applying for loans from various government programs or whether they are laying off or furloughing employees.

What it means for you: Expect some wild swings in the market in the weeks ahead as investors react to earnings reports. At the same time, experts say that earnings season could be positive for stocks, particularly if executives offer reasons to be optimistic about the broader economy.

Economists forecast biggest decrease in consumer spending in history

What's happening: The monthly retail sales report for March is scheduled for release on Wednesday. This details how much American consumers spent on things like clothing and food.

Economists currently forecast that retail sales tumbled 5.9%, which would mark the biggest month-over-month decrease in spending since the government started collecting data started in 1992. That's not altogether surprising since most nonessential stores nationwide have been temporarily shuttered as a result of the coronavirus.

Why it matters: Wall Street will be looking for any bright spots, such as categories outside of the necessities like food. This report is closely tracked because consumer spending accounts for more than two-thirds of U.S. economic growth, and it will help professionals to estimate the extent of declines in gross domestic product (GDP) during the first and second quarters.

What it means for you: You're probably not spending much money right now on discretionary items, as are most Americans. Wall Street assumes an economic recession is all but inevitable at this point, and Individual economic reports like this one will be used to estimate the extent of that slowdown. 

The bottom line

There's reason to be optimistic about April. In recent weeks, both the S&P 500 and Dow Jones Industrial Average have rebounded more than 20%, the technical threshold for designating the end of a bear market.

Even so, experts warn that there's likely to be continued market bumpiness ahead, especially with the start of earnings season. And coronavirus-related news will continue to dominate the attention on Wall Street.

When it comes to your portfolio, though, billionaire investor Howard Marks says it's time for investors to play offense. At times like this, it's important to remember that downturns can benefit long-term investors and selling right now could be the biggest mistake of your investing career. In fact, right now could be a "real opportunity to create wealth."

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