Investing

Economists expect good news for the housing market and employment numbers this coming week

Twenty/20

After its worst week since March, the U.S. stock market bounced back in the recent days and the S&P 500 rose 1.9% through Friday. It's not just the biggest stocks leading the market's surge: Gains among smaller stocks show there's broader optimism among traders on Wall Street.

The Russell 2000 index has jumped almost 24% since the end of March, outpacing the 20% gains for the S&P 500. The Russell 2000 is a benchmark for small-cap stocks and tracks 2,000 companies that typically are more U.S.-focused in their businesses. 

Even as the number of Covid-19 cases is increasing in parts of the country, traders are focused on other news that's positive for the market. Consumer spending surged the most in history during May as various states reopen their economies and the Federal Reserve remains committed to providing support for the U.S. economy and markets.

In the week ahead, traders will find out if home sales picked up in May, as economists currently project, and whether the number of people filing for unemployment benefits each week has continued to decrease.

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

Housing activity appears to have picked up again

What's happening: A few closely tracked measures of the housing market are scheduled for release in the week ahead. On Monday, expect a report on the number of existing homes sold in May, followed on Tuesday by data detailing the number of new homes sold and building permits filed for new construction projects.

Economists currently project gains for two of the three measures, though the numbers will still probably be lower than the level of activity before the pandemic.

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Why it matters: Homebuying and selling was mostly put on pause as a result of local shutdowns, but the housing market has been one of the first areas of the economy to bounce back, as buyers have been enticed by record low mortgage rates. Applications for mortgages just jumped to an 11-year high, and millennials are leading a charge back to the suburbs

What it means for you: Wall Street monitors the real estate market so closely because the housing industry generally makes up to 18% of gross domestic product (GDP), according to the National Association of Home Builders. The housing market is perhaps one of the best gauges of confidence, because consumers need to feel optimistic about their financial situations to justify such a big expense.

Expect a survey of consumer confidence in the week ahead, which economists currently project held steady in June compared with May. 

Thanks to low interest rates, experts say now may be a good time to buy a home or car. If you haven't already, it's also an opportunity to refinance your mortgage at lower rates. 

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Economists expect 12th straight week of decline in jobless claims

What's happening: The weekly number of Americans filing new applications for unemployment surged to more than 6.8 million in late March. Since then, however, this number has been decreasing for 11 straight weeks, and economists currently project another decline for the report scheduled to be released on Thursday.

Even so, the most-recent decline in jobless claim applications was not cause for celebration on Wall Street because it was worse than expected. What's more, 20.5 million Americans continue to receive these unemployment benefits, which is down from a peak of 24.9 million in May but still more than three times higher than the peak of the Great Recession.

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Why it matters: The service industry has been especially hard hit by the coronavirus outbreak, and now with all 50 states at some stage of reopening, many of these these furloughed or laid off employees should return to work. The big question on Wall Street is how quickly the economy can recover from the recession that's underway, and this weekly report is one of the best real-time indicators for whether that's transpiring.

What it means for you: If you're out of work, there may be additional assistance on the way in the form of a second stimulus check or a $450 to $1,200 back-to-work bonus, which appears more likely right now. Make sure to file for unemployment benefits, if you haven't yet; catch the eye of recruiters by optimizing your LinkedIn profile; find some ways to earn extra cash this summer while you look for a new job; and consider these tips from experts if you're considering starting your own business.

Finally, because employment is one of the most-watched economic indicators on Wall Street, expect there will be some short-term volatility in the stock market surrounding these weekly reports — especially if there are surprises.

The bottom line

Thanks to the gains in the past week, the U.S. stock market is within 8.5% of its pre-pandemic peak. For the year, the S&P 500 now is down just 4.1%. 

For the remainder of June, traders will continue to monitor the rate of coronavirus infections, particularly as those tick up in various parts of the country. In the weeks ahead, traders will remain focused on reopening efforts around the country and how quickly different parts of the economy are rebounding.

After the stock market surged more than 40% between late March and early June, it became, more recently, a bit turbulent. The market's historic ups and downs this year are a good reminder why it's important to invest for the long term, especially for new investors who have been attracted by a "generational opportunity" to buy stocks at lower prices. Whether you're a seasoned investor or have just started your journey, remember to keep a long-term perspective with your portfolio and avoid making emotional decisions. 

Finally, it's important to remember that downturns can benefit long-term investors and selling during a decline 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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