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Traders look to Europe for guidance on reopening the US economy — what to watch in the week ahead

Twenty/20

Recent weeks have delivered some early reports on economic growth in March, and business activity more broadly in the first quarter. And the takeaway, as expected, has been sobering.

The global economy will this year likely suffer the worst financial crisis since the Great Depression, the International Monetary Fund said on April 14. And U.S. gross domestic product (GDP) is forecasted to fall 5.9% in 2020. The extent of the economic damage from the coronavirus pandemic will become clearer in the weeks ahead. 

That's why experts caution that the market slump may not yet be over. The coming week will mark two very different milestones for the U.S. stock market: One month since the S&P 500 fell to its lowest level since 2016 and two months since this benchmark last hit an all-time high. As of Friday's close, the S&P 500 has surged 28% from that March low and now sits about 15% below its February high.

The week ahead is likely to bring more reports that highlight the impact of this pandemic on U.S. economic growth and corporate results. More than 60 companies in the S&P 500 — including IBM, Netflix, Coca-Cola, Delta, Intel, and American Express — are scheduled to report earnings and profit for the first quarter. Meanwhile, the economic calendar includes reports on manufacturing, consumer confidence, and home sales. And while President Donald Trump has laid out guidelines for reopening the economy, the decision-making is left up to the states.

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

Economists forecast declines in manufacturing activity

What's happening: The week ahead brings a couple of key reports on activity in the manufacturing industry. On Thursday, traders will monitor the results of a monthly survey of purchasing managers, followed on Friday by a monthly report detailing the number of orders to U.S. factories for big-ticket manufactured goods in April. 

Economists forecast the survey index fell to the lowest level since data collection began in 2012, while durable goods orders slumped the most since 2014. A separate report last week showed that manufacturing in the New York area fell in April to a historic low.

Why it matters: Much attention has been paid to the hard-hit service sectors of the economy, but manufacturing activity has also slowed significantly during the pandemic. Though the industry made up about 11% of gross domestic product (GDP) as of 2018, it's still a key component of the broader economy. 

What it means for you: While your livelihood may not be directly connected with the manufacturing industry, changes in this sector can still affect the broader economy and you — especially when activity ramps up or slows down. And while traders have been bracing for these kinds of reports for the months of March and April, there could be short-term turbulence in the stock market if the declines are steep.

Traders will look for clues from Europe's reopening efforts

What's happening: Several European countries are cautiously starting to reopen their economies, and Wall Street will be watching those efforts for clues about how that might play out closer to home. Norway, Germany, and Italy are planning to ease restrictions or reopen some shops starting on April 20. 

Why it matters: The ongoing debate is about when, and how, to reopen the U.S. economy without leading to a resurgence in coronavirus cases. New York and other East Coast states are extending their shutdown of nonessential businesses to at least May 15, New York Governor Andrew Cuomo said on Thursday. The lockdown was previously scheduled to lift on April 30. 

That's why people on and off Wall Street will look to what other countries are doing, especially those that were hit by the coronavirus outbreak before the U.S. 

What it means for you: There's still a lot of uncertainty with respect to the coronavirus, and that seems likely to continue, at least for the foreseeable future.

There are ways to take charge of your own situation, from tackling some financial to-dos to advancing your career from home and making smart money moves with your stimulus check. 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. Finally, if you're still working but feel your job may be at risk, there are steps to take now to prepare for a financial disruption

The bottom line

As earnings season heats up, there likely will be some wild swings in individual stock prices that could in turn move the broader market. And coronavirus-related news — along with its toll on the U.S. economy — will continue to dominate the attention on Wall Street.

When it comes to your portfolio, though, it's important to keep a long-term perspective and avoid making emotional decisions. One expert who's been investing for more than 40 years says that two simple rules have kept him on-track during past bear markets.

Finally, 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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