The S&P 500 has risen more than 3% to start the year, adding to 2019's gains of nearly 29%. Generally speaking, recent economic reports have been better than expected, which has also helped to boost sentiment on Wall Street.
There could be some short-term bumpiness in the market in the weeks ahead, as earnings season heats up. When companies report profit results, in this case for the fourth quarter, those announcements are often accompanied by some dramatic moves up or down for individual stocks — which can cause short-term swings in the broader market.
In the week ahead, more than 40 companies are scheduled to report results, including Netflix, United Airlines, Intel, and American Express. And so far, the earnings season is off to a solid start.
Traders will also monitor economic reports that could point to further improvement in the pace of U.S. growth. Economists currently project improvement in a report of 10 leading economic indicators, while the number of people filing jobless claims has fallen after a temporary spike.
Here's what to watch in the stock market during the week ahead — and how the news could affect your bottom line.
What's happening: A monthly report that tracks 10 economic indicators is expected to be released on Thursday by The Conference Board. This report includes metrics like building permits for new housing units, stock prices, manufacturing activity, and consumer expectations for business conditions. Economists currently project this report jumped the most in December since July.
Why it matters: Recent reports have given traders reason to be optimistic about the pace of economic growth lately. Consumer confidence remains high, U.S. retail sales rose for a third straight month in December, holiday sales were near the high end of expectations, and the economy ended 2019 on a strong note which helped put recession fears to rest.
Traders are looking for confirmation that the economy has continued to strengthen. And earnings reports from companies, especially what they forecast for the future, will help traders to assess how robust growth will be ahead.
What it means for you: Slower economic growth was the primary reason that the Federal Reserve cut interest rates three times in 2019. A growing number of traders think the Fed's next move could actually be a rate hike, with a 16% chance of that happening at the upcoming meeting on January 28-29. They don't see a similar probability of a rate cut happening until at least June.
What's happening: The number of Americans filing claims for unemployment benefits dropped for a fifth straight week last week. Back in mid-December, these jobless claims jumped to the highest level in more than two years. The more recent trend of declines has suggested the labor market remains strong — and reports such as this one are among the ways traders assess if that's true. Economists currently project initial jobless claims ticked up slightly for the data to be released on Thursday.
Why it matters: Even though the pace of hiring was disappointing in December, experts expect that there will continue to be solid payroll gains through 2020.
What it means for you: Even if you're working full time, it can be helpful to monitor job-related indicators because they give you a sense of how businesses are faring. While the pace of hiring in 2019 was the slowest since 2011, it was generally a very good year for workers, and economists expect that full employment could result in wage increases.
If you're out of work or looking for a new job, January is popular both for hiring and job searching. Data from Monster shows that eight of the 10 busiest days for job searches on the platform occur during the first month of the year. And switching jobs can be a good way to earn more money.
The record-busting rally in the stock market could hit some short-term bumpiness during earnings season. And experts have warned that the market's strong start to the year makes it vulnerable to a slump ahead. Even if the stock market's gains slow in 2020, though, as experts expect, it's smart to stay invested for the long term and resist the urge to sell investments based on short-term events.
In fact, any turbulence in the market can be a good opportunity to buy stocks at lower prices. Continually adding to your portfolio over time, a strategy known as dollar-cost averaging, can help to smooth out the price you pay for your investments. And no matter what happens in any given week, it's important to keep perspective and remain consistent with your investment strategy.
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