For markets in week ahead, investors will gauge the severity of the coronavirus spread

• The coronavirus outbreak reached a record 50,000 U.S. cases a day, yet the stock market was up sharply.
• Strategists say virus data is the thing to watch, and markets in the past week have shrugged off a surging outbreak.
• There's not much data ahead, but the market is focused on ISM service data Monday.

Stocks in the week ahead will focus on the severity of the spread of the coronavirus, during what should be a lull between Thursday's strong jobs report and the upcoming earnings season.

Stocks had a bang-up week, in the four days ahead of the long July 4 weekend, with all indexes making sharp gains. A surprise record gain of 4.8 million jobs in June lifted stocks on Thursday, boosting sentiment into the weekend. The S&P 500 was up 4%% at 3,130, and the Dow was up 3.2% at 25,827%, in their best week since June 5. The Nasdaq, up 4.6% posted its best week since May 7 and closed at a record 10,207. 

Tom Lee, founder of Fundstrat, said the market has further to go, even with new U.S. coronavirus cases reaching a record daily high above 50,000. 

"There's more weak sellers, and I think the market is in the hands of buyers. I think stocks are going to do pretty well in July," he said. "There's just too much cash on the sidelines, and there's concern about the virus. There's too much concern about the economy. There is just too much of a wall of worry."

Stocks have been able to shrug off the spreading coronavirus outbreak that has resulted in renewed shutdowns of some economic activity and delays to some anticipated openings. There is concern those economic closings could be a blow the recovery, making it more shallow and less sustainable than expected.

Earnings season starts mid-month, and there are just a few reports in the coming week. Levi Strauss releases earnings Tuesday,  Bed, Bath and Beyond is Wednesday, and Walgreens Boots Alliance reports Thursday. 

According to Refinitiv, second-quarter earnings are expect to be down 43%.

As earnings start to roll out, Congress may also be a focus for markets as it negotiates the next round of stimulus.

"We know July is going to be difficult unless we get more fiscal policy," said Art Hogan, chief market strategist at National Alliance. "The labor market is going to run dry or at least slow down because part of it is helped by government assistance."

Congress has a small window after July 20 to debate the phase 4 Covid stimulus package, which is expected to include a renewal of enhanced unemployment benefits that expire at the end of July. But there's disagreement on what those benefits should be, and how big the package should be. It also is expected to include aid for state and local governments.

As states shut activity again, there is concern that some data that has shown big improvements may not continue to do so. "Are markets prepared to see sequential data that doesn't improve? At some point the markets may pay more attention to that, but right now we're riding on a wave of better data and positive vaccine news," Hogan said, adding a worrisome wild card is the extent of the outbreak.

In the week ahead, there are just a few data releases, including jobless claims Thursday. They will again be important, especially after continuing claims actually rose in the past week's release by 59,000 to 19.3 million, despite the surge in rehiring, evident in the June employment report.

ISM nonmanufacturing data will be released Monday, and it will also get more than the usual attention.

"The key to next week is going to be the ISM services number, which will be important because of the dependence we have on the service side of the economy," said Peter Boockvar, chief investment strategist at Bleakley Advisory Group.

But it's virus news that may ultimately decide the course of the market and the economy.  

"I think there's people watching 12 vaccines, but nobody really has an idea on the cadence of the news. If it gets negative, it's negative for markets," said Lee. In the past week, stocks reacted to positive vaccine news from Pfizer.

Lee said the market has been able to look past the concerning rise in cases because death rates have been lower in the latest outbreak, which is affecting far more younger people.

"I think it's telling us cases are less important than severity," Lee said, adding the outbreak is still a big risk for markets. "It would be important for Texas , Florida or California to show a local peak."

In the coming week, the Treasury will auction $46 billion 3-year notes Tuesday, $29 billion reopened 10-year notes Wednesday and $19 billion in reopened 30-year bonds Thursday.

Week ahead calendar

Monday

9:45 a.m. Services PMI

10:00 a.m. ISM nonmanufacturing

Tuesday

9:00 a.m. Atlanta Fed President Raphael Bostic

10:00 a.m. JOLTS

1:00 p.m. Fed Vice Chair Randal Quarles

2:00 p.m. San Francisco Fed President Mary Daly, Richmond Fed President Tom Barkin on panel

Wednesday

12:15 p.m. Atlanta Fed's Bostic

3:00 p.m. Consumer credit

Thursday

8:30 a.m. Initial jobless claims

10:00 a.m. Wholesale trade

12:00 p.m. Atlanta Fed's Bostic

Friday

8:30 a.m. PPI

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