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Jobless claims could worsen the coronavirus collapse — what to watch in the week ahead

Twenty/20

The coronavirus outbreak has caused widespread damage in America over the last few weeks, taking a toll on human health, starting what likely will be mass layoffs, and causing turmoil in the stock market. 

Relief in various forms is already in the works. In addition to cutting a benchmark interest to near zero, the Federal Reserve will help businesses get up to $1 trillion in funding in the short-term borrowing markets. 

Meanwhile, President Donald Trump's administration is working on a plan to send Americans cash — proposed amounts: $1,000 per adult and $500 per child — as part of a massive stimulus package. This week, he signed a $100 billion coronavirus aid package into law that expands access to emergency paid leave and other assistance. 

While these actions and others are intended to help workers and businesses during the coronavirus outbreak, they may also start to settle the fears of traders. This week, the S&P 500 fell sharply and landed at levels last seen in early 2017.

Like many of the rest of us, traders are keeping abreast of the news. Developments, both in terms of the outbreak's spread and economic impact, will continue to drive movements in the market. Traders will also monitor a weekly report of claims for unemployment benefits and some manufacturing data.

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

Economists expect jobless claims to surge to 10-year high

What's happening: The number of Americans filing applications for unemployment surged 33% for the week that ended March 14, and economists expect that's just the start of virtually unprecedented levels of job loss in the U.S. For the report scheduled to be released on Thursday, economists currently project that 500,000 people filed these jobless claims, more than double the last reading and the most since February 2010.

Why it matters: The service industry has been especially hard hit by the coronavirus outbreak. The unemployment rate is likely to double, according to some estimates. As a result, a recession for the U.S. economy is no longer avoidable — it's already here, Bank of America warned investors on Thursday, though there won't be an official designation for some time. A recession is typically defined as two consecutive quarters of declines in gross domestic product (GDP), which is the sum of the value of all goods and services produced in an economy.

What it means for you: You may have already felt the impact of the coronavirus outbreak on your employment situation. If you've been laid off, we have tips on how to file for unemployment benefits and find alternative sources of income to tide you over. If you're still working full-time but feel your job may be at risk, there are steps to take now to prepare for a financial disruption. Finally, if you're a business owner, legislators are looking at the possibility of giving small businesses money so that you can keep paying their employees. 

A slowdown in manufacturing appears likely

What's happening: After a choppy year in 2019 for American manufacturers caused by the ongoing trade spat between the U.S. and China, these companies are also feeling the impact of the coronavirus outbreak.

The week ahead brings a few key reports on activity in the manufacturing industry. On Tuesday,  traders will monitor the results of a monthly survey of purchasing managers, followed on Wednesday by a monthly report detailing the number of orders to U.S. factories for big-ticket manufactured goods in February. Economists currently project both measures fell. 

Why it matters: While the manufacturing industry was already shrinking — it made up about 11% of gross domestic product (GDP) as of 2018 — it's still a key component of the broader economy. And while it's obvious to see the effects of closed businesses, like restaurants and gyms, what's happening inside of factories isn't as easy to gauge.

What it means for you: While your livelihood may not be directly connected with the manufacturing industry, changes in this sector can still affect you — especially when activity ramps up or slows down. What's more, a big uptick in this segment of the economy, particularly amid concerns of a slowdown, could help push stock prices higher.

The bottom line

The U.S. stock market remains in a bear market, defined as declines of at least 20% from a recent high. As of Friday's close, the S&P 500 was down nearly 32% from its all-time high in February, and it's wiped out three years worth of gains.

The focus on Wall Street in the weeks ahead will continue to be how the coronavirus can be contained, how severe its impact will be on economic growth, and what other relief the government or Federal Reserve will offer. While these market events can seem scary, remember that they can be good for long-term investors and selling right now could be the biggest mistake of your investing career

At times like this, it's important to keep your financial goals in mind and stay focused on the long-term merits of investing. That's because the market has always bounced back, even from worse sell-offs than the current one.

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