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Economists expect the biggest jump in consumer spending ever, and more money news to watch

Twenty/20

To some people on Wall Street, the stock market's surge of as much as 44% since late March felt too good to be true. Those skeptics got some vindication in the past week.

On Thursday, the S&P 500 tumbled 5.9% for its worst day since mid-March, only to rebound on Friday and rise 1.3%. To blame for the latest swoon in the market are renewed concerns about a second wave of coronavirus infections and how quickly the economy can recover from its current recession.

Those two days also served as a reminder that the market remains turbulent amid lingering uncertainty about the pandemic. They also reinforce that staying invested through ups and downs — both in the past week and several months — has been and continues to be the best course for investors.

In the week ahead, traders will get a sense of whether consumers are feeling more confident about spending again, now that all 50 states are in some stage of reopening. In addition, economists currently are projecting an increase for a report detailing 10 leading economic indicators.

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

Economists forecast biggest jump in consumer spending ever

What's happening: The monthly retail sales report for May is scheduled for release on Tuesday. This details how much American consumers spent on things like clothing and food.

Economists currently forecast that retail sales surged 9%, which would mark the biggest month-over-month gain in spending since the government started collecting data in 1992. However, context is key: In April, retail sales plunged a record 16.4%, which was the worst decline in history.

Why it matters: Wall Street is expecting a rebound in spending. Investors will be interested in what categories saw the biggest increases — especially those considered to be more discretionary, like cars, furniture, and electronics. This report is closely tracked because consumer spending accounts for more than two-thirds of U.S. economic growth and it will help professionals estimate how confident consumers are about returning to stores and restaurants as the economy continues to reopen. 

What it means for you: Your spending habits have likely changed in recent months: Maybe, like many Americans, you focused on stocking up on the essentials and on saving during the worst of the pandemic. Everyone's spending going forward will be crucial to determining the pace of growth, especially since it's now official that the U.S. economy entered an economic recession in February.

As people on Wall Street try to gauge how quickly the economy will recover, reports like this one will be helpful in estimating the extent of recent gains.

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What's the broader trend in the economy?

What's happening: A monthly report that tracks 10 economic indicators is scheduled for release 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 rose in May, the first time it improved since January.

Why it matters: A majority of economic figures released each week detail what already happened, so traders are especially keen on any reports that are forward looking. Two gauges from the Federal Reserve — one from the New York Fed and the other from the Atlanta Fed — are pointing to declines of 25% to nearly 49% for gross domestic product (GDP) in the second quarter.

What it means for you: The stock market's rally has been boosted by the Federal Reserve's unprecedented action in recent months and its plans to keep interest rates near zero through 2022. But Wall Street will want to see signs that the Main Street economy also is recovering to justify pushing stock prices higher in the short term. As a result, you can expect further bumpiness in the stock market in the weeks ahead.

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The bottom line

While the U.S. stock market is still close to its pre-pandemic levels, the declines in the past week have put that goal a bit further out of reach. The S&P 500 now is about 10.2% below its all-time high in February, compared with just 4.5% below that level earlier in the week. At the same time, one benchmark of tech stocks actually reached a new peak recently.

For the remainder of June, traders will have a renewed focus on the 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.

The past few months have attracted new investors who have taken advantage of 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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