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Despite coronavirus layoffs, US stocks had their best week since 2009 — what to watch in the week ahead

Twenty/20

A curious thing happened this past week. Even as the coronavirus outbreak worsened, both with respect to its toll on Americans' health and the economy, the S&P 500 surged more than 10% during the week, the most in 11 years.

The Dow Jones Industrial Average emerged from a bear market on Thursday, at least temporarily. A bear market is defined as a decline of more than 20% from a recent high, and once an asset rebounds 20% from a low, it's in a new bull market. But the S&P 500 remains in a bear market, having only gained nearly 14% since its low.

Experts caution that the worst of the market's declines may not be over and the recent gains could just be a "head fake," or a temporary increase before it quickly changes course. While traders have focused on relief, including a $2 trillion stimulus bill passed by Congress and support from the Federal Reserve, a record-setting number of people filed for unemployment — and that's likely to get worse.

With that in mind, jobs will remain in focus during the coming week. Traders will monitor that weekly report of unemployment claims due Thursday and a monthly report on hiring scheduled for release Friday. In addition, they'll monitor a monthly survey of consumer confidence due Tuesday. 

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

Economists project jump in unemployment rate, surge in jobless claims

What's happening: The Department of Labor's monthly employment report is scheduled for release on April 3, and it's likely to reflect the mass layoffs that have happened as a result of the coronavirus outbreak. Wall Street closely tracks the number of nonfarm jobs created (or lost) in the previous month, and economists currently project that employers shed jobs at a level not seen since 2009. The unemployment rate could jump to 3.9%, from 3.5% previously, with some estimates suggesting this rate could go as high as 10%.

Similarly, traders will monitor the next report of the number of people filing for unemployment benefits. A record number of American workers, nearly 3.3 million, filed for these benefits for the week ended March 21. And for the next report scheduled to be released on Thursday, economists currently project that 4.5 million people will have filed for these jobless claims.

Why it matters: While the pace of hiring subsided in 2019, the employment situation in the U.S. was still positive prior to the coronavirus outbreak. That obviously changed quite quickly, and traders are now bracing for a "tsunami of negative news" about the economy. And a recession, or two consecutive quarters of declines in gross domestic product (GDP), now is inevitable, according to many experts.

The service industry has been especially hard hit by the coronavirus outbreak, and there's likely to be a ripple effect in other sectors. If the unemployment rate were to double, or go even higher, as some estimates suggest, that would put it back to levels last seen about eight years ago, when the job market was still recovering from the Great Recession.

What it means for you: If you're out of work, there is help coming. The government could soon send out $1,200 stimulus checks, while borrowers with student loans can have their interest rates automatically set to 0% for at least 60 days. And you may be eligible to file for unemployment benefits. The coronavirus relief bill also offers bigger unemployment checks, increases the duration of those payments, and extends jobless benefits to previously ineligible groups of workers, like gig workers and freelancers. 

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 reports — especially if there are surprises.

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How to collect unemployment benefits

Video by David Fang

Economists expect confidence fell to lowest since 2016

What's happening: Millions of Americans are out of work and staying home, while businesses, gyms, restaurants, theme parks, and sporting events are temporarily shuttered. That's surely affected how confident people are feeling about their finances and the economy. And because consumer spending makes up about two-thirds of U.S. gross domestic product (GDP), traders will monitor reports measuring consumer confidence to try to predict what will happen when the pandemic subsides.

One survey for the month is due on March 31 from the Conference Board. Economists currently project a decrease to the lowest level since November 2016. Though, again, these estimates could be revised even lower before the survey is released.

Why it matters: A majority of Americans surveyed by the Pew Research Center found said the coronavirus outbreak is a major threat to the health of Americans and to the U.S. economy. And 33% said they or someone in their household has lost their job or suffered a pay cut or reduction in work hours because of the coronavirus.

What it means for you: When Americans feel less confident, they pull back on big-ticket purchases like a home or car. And that's likely to have a ripple effect in the broader economy. There are ways to feel more confident about your finances, however. Take steps to prepare for a financial disruption now, learn what to do if your job is at risk, improve your finances at home, and figure out how to get health-care coverage if you lost your job.

The bottom line

The S&P 500 remains in a bear market, and as of Friday's close, this gauge was down nearly 25% from its all-time high in February.

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. In fact, right now could be a good buying opportunity, if you have the money.

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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