People make face shields at the Brooklyn Navy Yard where local industrial firms have begun manufacturing Personal Protective Equipment (PPE) on March 26, 2020 in New York City. Eduardo Munoz Alvarez | Getty Images

Everything from auto sales to manufacturing surveys and employment data in the coming week will likely paint a bleak picture of how much the first weeks of the coronavirus shutdown have already hit the economy. Market turbulence is expected to remain high, though volatile moves in the past week were largely to the upside. The S&P 500, by Thursday, had soared 20% intraday off its Monday low, before giving up some gains Friday. For the week, the S&P 500 was up 10.3% at 2,541. The market's rip higher ignited a debate about whether stocks have now bottomed, and that discussion will carry on into the week ahead. Some major investors like billionaire investor Leon Cooperman and BlackRock's Rick Rieder believe stocks may have hit their lows. Other strategists say the market needs to see a retest before a bottom can be called. "It's amazing to me that people are so bullish when virus cases are accelerating and economic growth is deteriorating," said Richard Bernstein, CEO Richard Bernstein Advisors. "I could see it if cases peaked out, and the economy is troughing."

It's the economy

In the coming week, the big number to watch could again be Thursday's weekly jobless claims, up a record 3.2 million for the week ended March 21, as the shutdown of stores, restaurants, and other businesses across the country resulted in immediate layoffs. Economists expect several million more claims to be filed for the past week, and they are looking at that new claims report as potentially more important than Friday's March employment report. The survey week for the March jobs report was ahead of some of the major shutdowns by the states most impacted by the virus. Economists expect nonfarm payrolls to drop by 56,000 in March, according to Dow Jones. Other data could show some of the early signs of an economy brought to a standstill. There are auto sales and ISM manufacturing releases on Wednesday, both March reports. Service sector data will be released Friday. Market focus will be more intensely focused on the economic data, shifting from the $2 trillion aid bill, signed by President Donald Trump on Friday. Economists expect the economy already may be in a slowdown and that it should trough with a double-digit decline in the nation's gross domestic product in the second quarter. Vehicle sales will be reported Wednesday, and sales are expected to have come to a near standstill even though shuttered dealerships continue trying to deliver autos to buyers. For "car sales, I would think the drop would be more precipitous," said Diane Swonk, chief economist at Grant Thornton. "They shut down in every major market. Even though they're offering deliveries and all that stuff, it's going to be a shocker ... large double digit decline." Auto sales were at an annualized pace of 16.8 million in February, and some economists say the number in March could be closer to 12 million. Congress passed a $2 trillion aid package to help put cash in the hands of workers and companies, so they can weather the effects of a shutdown. Separately, the Fed has delivered a massive amount of monetary stimulus that has helped ease up some of the problems in illiquid credit and even the Treasury market. It has been buying Treasury and mortgage-backed securities at a record pace of $70 billion a day, and markets are focused on when the Fed will alter the size of its purchases, which are open-ended. "This week, plus last week was more than $600 billion. It's monumental." said Michael Schumacher, director, rates at Wells Fargo. The Fed said it was reducing the purchases to $60 billion a day, which is the amount it had been buying in a one-month period.

Stimulus one-two punch

The double-barreled boost to markets from the Fed's policy and the prospect of the fiscal spending package helped fire up the mid-week rally in stocks. "Even though the market, from the intraday low on March 23 through the intraday high on March 26, soared more than 20%, which to many is the definition of a new bull market, this low must be sustained before a new bull market can be crowned," said Sam Stovall, chief investment strategist at CFRA. "We've got to maintain this recent low, in my opinion, for another six months before we can call this another bull market." Stovall said the S&P 500 is often higher in April, though this year it may not be. The S&P is down about 14% for the month of March so far. Since World War II, April has been the second best month for the S&P, which has been up an average 1.5% and higher 71% of the time. The big rally in stocks this week is not an unusual occurrence in a bear market, Stovall said. "There have been multiple times in history - 1973/1974, 2001/2002, and combined with 2008, 2009, that we saw 20 plus percent rallies before ultimately setting an even lower low." Stovall said it's likely there will be a lower low. "The only think that causes me to say we may not retest the bottom is everybody is saying we need to retest the bottom," he said. The S&P hit a low of 2,191 before bouncing higher.

Credit un-crunching

In addition to its Treasury and mortgage purchases, the Fed has cut rates to zero, added liquidity in the repo market and committed to creating vehicles to help corporate paper, municipal bonds and corporate debt. "Stress levels in financial markets have receded in a meaningful way this week, thanks in no small part to the Fed's aggressive moves. Leveraged loans rebounded somewhat in price yesterday, and the MBS market is seeing broadening improvement (though it is far from normal)," noted Stephen Stanley, chief economist at Amherst Pierpont. Stanley said the Fed may not need to buy corporate bonds for now, based on new issuance activity in that market this week.

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