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Weekly Market Insights: Stocks Rally Ahead of Fed Meeting

Stocks rallied last week as investors received better-than-expected consumer and producer inflation data.

The Dow Jones Industrial Average rose 2.60 percent, while the Standard & Poor’s 500 Index gained 4.02 percent. The Nasdaq Composite led, picking up 5.95 percent as tech stocks rebounded. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 1.01 percent.^1,2

A Wednesday to Remember

Stocks bounced out of the gate at the start of the week as “risk on” investors made moves before the pending release of the twin inflation reports–the Consumer Price Index (CPI) and Producer Price Index (PPI). The three major averages added slightly more than 1 percent in Monday trading.³

On Wednesday, stocks initially dipped following the release of the CPI as traders appeared disappointed by the report. By midday, sentiment changed. The S&P 500, down as much as 1.6 percent in early trading, gained 1.1 percent by the closing bell. More inflation data out Thursday showed wholesale price increases were tempered, which helped stocks move higher through the balance of the week.^4,5

Small Caps Shine

Small-cap stocks, as measured by the Russell 2000 Index, have pushed higher in recent weeks, which is a telling move for some Wall Street observers. The Russell 2000 has outperformed the S&P 500 by more than 4 percent during Q3 so far.⁶

One reason is that smaller stocks tend to respond when they anticipate interest rates will trend lower. Investors appear to be positioning themselves in small cap issues, expecting the Fed may adjust rates at its September meeting as it looks to guide the economy to a soft landing.⁷

Footnotes and Sources

^{The Wall Street Journal, September 13, 2024}
^{Investing.com, September 13, 2024}
^{The Wall Street Journal, September 10, 2024}
^{The Wall Street Journal, September 11, 2024}
^{CNBC.com, September 12, 2024}
^{The Wall Street Journal, September 13, 2024}
^{MarketWatch.com, September 12, 2024}

Tax Tips on Identity Theft

Here are a few things that may help you against identity thieves:

The Internal Revenue Service (IRS) never will contact you via email or phone to request personal information. If you receive a scam email or call that claims to be from the IRS, report it to phishing@irs.gov.

People can steal your identity by stealing your wallet or purse, receiving the information they need over the phone or email, finding your personal information in the trash, or accessing information you provide to an unsecured website (only enter credit card information on websites that start with “https://”).

If you receive a letter from the IRS indicating that more than one tax return was filed in your name, your identity may have been stolen.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁸

Footnotes and Sources

^{IRS.gov, May 8. 2024}

Weekly Market Insights: Markets Focus on Fed’s Big September Move

Stocks fell last week as soft economic data rattled investors focused on the Fed’s next move with interest rates.

The Dow Jones Industrial Average lost 2.93 percent, while the Standard & Poor’s 500 Index dropped 4.25 percent. The tech-heavy Nasdaq Composite fell 5.77 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, declined 2.91 percent.^1,2

Economic Data Unsettles Investors

The four-day trading week got off to a rough start as weak manufacturing data reawakened recessionary fears. All three major averages were down for the first session after the Labor Day holiday. For many, it was reminiscent of August 5, when stocks tumbled as recession worries unsettled investors.³

Attention shifted to Friday’s jobs report as stocks traded narrowly. Markets initially reacted positively to news that job growth rebounded slightly and unemployment ticked down. However, selling pressure increased as the trading session progressed and investors digested the underlying data. The S&P 500 had its worst week since March 2023.⁴

Focus on Fed’s September Meeting

The Federal Reserve seems poised to make a tough decision regarding monetary policy in its September meeting. The jobs market and other softening economic data have quickly overshadowed concerns about inflation.

However, there’s still a case to be made for a soft landing.

Job growth in August was slower than expected, but 142,000 jobs were created–an uptick that some would argue is an overall positive despite missing expectations. The drop in the unemployment rate to 4.2 percent bolstered the soft-landing narrative.⁵

Market observers anticipate a 0.25 percent rate adjustment in September, but some contend that the Fed may consider a more significant move. On Friday, Fed Governor Christopher Waller said he was open to a larger move if necessary. Chicago Fed President Austan Goolsbee and New York Fed President John Williams commented similarly during the week.^6,7

Footnotes and Sources

^{^{The Wall Street Journal, September 6, 2024}}
^{^{Investing.com, August 30, 2024}}
^{^{The Wall Street Journal, September 3, 2024}}
^{^{The Wall Street Journal, September 6, 2024}}
^{^{The Wall Street Journal, September 6, 2024}}
^{^{Marketwatch.com, September 5, 2024}}
^{^{CNBC.com, September 6, 2024}}

Reporting Cash Payments

Individuals, companies, corporations, partnerships, associations, trusts, and estates must report cash transactions of more than $10,000. These cash payments can include jewelry sales, a gift from a family member, an overseas purchase, or any other cash transaction. You also need to report cash payments received in one lump sum, in two or more related payments within 24 hours, or as part of a single transaction or two or more transactions in the previous year.

All you need to do is file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. The form requires information about the giver and receiver of the cash, a description of the transaction, and information about any other parties involved.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

Footnotes and Sources

^{IRS.gov, May 8. 2024}

Weekly Market Insights: Stocks React to Key Data and Earnings

There were mixed results for stocks last week as upbeat economic data and a critical Q2 corporate report shaped the week.

The Dow Jones Industrial Average rose 0.94 percent, while the Standard & Poor’s 500 Index increased 0.24 percent. The Nasdaq Composite lagged, falling 0.92 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, gained 0.35 percent.^1,2

Key Economic Data

Markets began the week quiet as investors awaited Q2 earnings from Nvidia, the world’s most influential name in artificial intelligence.

The chipmaker–the second largest stock in the S&P 500 by market capitalization–dipped on the news, putting pressure on the Nasdaq and S&P 500. (The Nasdaq and S&P 500 are market-weighted averages, so larger companies have an outsized impact.)³

Nvidia is mentioned to show its influence on the overall stock market. It should not be considered a solicitation for the purchase or sale of the company.

On Thursday, an upward revision in Gross Domestic Product (GDP) data boosted markets, although stocks fell later in the day. Friday’s Personal Consumption and Expenditures (PCE) data seemed to confirm that inflation remained tame, welcome news for investors who are anticipating the Fed may adjust rates in September.⁴

Softer Landing in Focus?

Several pieces of data helped build a narrative that the economy may be coming in for a soft landing.

Second-quarter GDP growth was revised upward, from 2.8 percent to 3.0 percent. That’s an improvement from Q1 GDP, which rose 1.4 percent. Some market watchers were concerned about the Q2 revision after pending home sales in July hit its lowest monthly level in 23 years.⁵

Meanwhile, the Federal Reserve’s preferred measure of inflation, the PCE Index, came in 0.2 percent higher in July–in line with expectations. Core PCE inflation, which the Fed tracks closely, edged up 0.2 percent–also in line with forecasts.⁶

Footnotes and Sources

^{The Wall Street Journal, August 30, 2024}
^{Investing.com, August 30, 2024}
^{CNBC.com, August 28, 2024}
^{The Wall Street Journal, August 30, 2024}
^{The Wall Street Journal, August 29, 2024}
^{CNBC.com, August 30, 2024}

Gig Economy Tax Tips

There are some essential tips to remember if you work as a gig worker, someone who takes temporary work through one or more employers:

All income from these sources is taxable, regardless of whether you receive information returns; this includes both full-time and part-time work and if you’re paid in cash.
As a gig worker, you must be correctly classified as an employee or an independent contractor; this can depend on where you live, even for the same services.

Lastly, it’s important to remember to pay the correct amount of taxes on this income throughout the years to avoid owing when you file. Because gig employees don’t have an employer withholding taxes from their paychecks, they can either submit a new W-4 and have their employer withhold more from their paycheck (if they have another job as an employee) or make quarterly estimated tax payments throughout the year.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁹

Footnotes and Sources

^{IRS.gov, May 8. 2024}

Weekly Market Insights: Powell: Fed is Ready for Rate Cut

Stocks notched a solid gain as dovish comments from Federal Reserve officials boosted the market’s recovery from early August lows.

The Standard & Poor’s 500 Index rose 1.45 percent, while the Nasdaq Composite added 1.40 percent. The Dow Jones Industrial Average picked up 1.27 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, gained 2.98 percent.^1,2

Dovish Week

Stocks started the week strong, rallying after Wall Street welcomed dovish comments from Minneapolis Fed President Neel Kashkari. The S&P 500 and Nasdaq each posted gains on Monday–the 8th consecutive winning session. The Dow rose for the 5th session in a row.^3,4

From there, markets traded in a narrow band until Wednesday afternoon when minutes released from the July 30-31 FOMC Meeting revealed more dovish comments. On Thursday, stocks dipped ahead of Fed Chair Jerome Powell’s annual Jackson Hole, Wyoming, speech.^5,6

Well-received comments from Powell on Friday boosted markets, with all three averages closing higher.⁷

“The Time has Come”

The Fed’s annual symposium for global central bankers started Friday morning with Fed Chair Powell’s much-anticipated speech. Citing the risk of the labor market cooling even further, he said, “the time has come for policy to adjust.”

Investors responded favorably, with the remaining question being how significant a rate cut might be. Powell kept that door open, adding that “the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”⁸

Footnotes and Sources

^{The Wall Street Journal, August 23, 2024}
^{Investing.com, August 23, 2024}
^{The Wall Street Journal, August 23, 2024}
^{The Wall Street Journal, August 19, 2024}
^{MarketWatch.com, August 22, 2024}
^{Reuters.com, August 22, 2024}
^{The Wall Street Journal, August 23, 2024}
^{The Wall Street Journal, August 23, 2024}

Who Qualifies for the Child and Dependent Care Tax Credit?

Let’s outline who the Internal Revenue Service (IRS) defines as a qualifying person under this care credit:

A taxpayer’s dependent who is under the age of 13 when the care is provided.
A taxpayer’s spouse who is physically or mentally unable to care for themselves and lived with the taxpayer for more than half the year.

In addition to spouses and dependents, the credit may also cover someone who is mentally or physically unable to care for themselves and lived with the taxpayer for six months; this is the case if that person was the taxpayer’s dependent or if they would have been the taxpayer’s dependent except for one of the following:

The qualifying person received a gross income of $4,700 or more.
The qualifying person filed a joint return.

If filing jointly, the taxpayer or spouse could be claimed as a dependent on someone else’s return.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁹

Footnotes and Sources

^{IRS.gov, May 8. 2024}

Weekly Market Insights: Markets Rise Thanks to Upbeat Indicators

Stocks posted solid gains last week, buoyed by robust economic data and constructive comments from Fed officials.

The Standard & Poor’s 500 Index rose 3.93 percent, while the Nasdaq Composite gained 5.29 percent. The Dow Jones Industrial Average lagged a bit, picking up 2.94 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, powered ahead by 4.31 percent.^1,2

Upbeat Economic News

Three critical economic data points gave investors what they were looking for: wholesale inflation, consumer prices, and retail sales.

Both the Producer Price Index and the Consumer Price Index rose less than expected in July, reinforcing a picture of cooling inflation. The July retail sales report on Thursday was stronger than expected, which added more fuel to the week-long rally.^3,4,5

Market action slowed down on the week’s final trading day, with positive consumer sentiment gains countered only by a drop in housing starts.

It was the S&P 500’s best weekly gain of the year so far and the best since November of 2023. The gains helped erase losses from earlier in the month, when “carry trades” news from Japan unsettled investors.^6,7

Double Assist

Last week’s market rally saw assists from two places: economic data and constructive Fed comments.

On Thursday, Atlanta Fed President Raphael Bostic said he had “a lot more confidence that inflation’s sustainably on its way to 2%,” citing steady drops in CPI. And St. Louis Fed President Alberto Musalem said, “the time may be nearing when an adjustment (to the Fed Funds Rate) may be appropriate.⁸

Footnotes and Sources

^{The Wall Street Journal, August 16, 2024}
^{Investing.com, August 16, 2024}
^{The Wall Street Journal, August 13, 2024}
^{The Wall Street Journal, August 14, 2024}
^{The Wall Street Journal, August 15, 2024}
^{The Wall Street Journal, August 16, 2024}
^{CNBC.com, August 16, 2024}
^{The Wall Street Journal, August 15, 2024}

Divorce or Separation Can Affect Your Taxes

The first thing to consider is alimony payments. Alimony payments paid under a divorce or separation instrument are deductible by the payer, and the recipient must include it in income. Alimony is not subject to tax withholding, so increasing the tax paid during the year may be necessary to avoid a penalty.

The next thing to consider is IRA contributions. A divorce agreement by the end of the tax year means taxpayers can’t deduct contributions made to a former spouse’s traditional IRA. They can only deduct contributions made to their own traditional IRA.

Once you reach age 73, you must begin taking RMDs from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov¹

Footnotes and Sources

^{IRS.gov, May 8. 2024}