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Stocks posted small declines last week as investors digested recent stock market gains and an unexpectedly high inflation read.

The Dow Jones Industrial Average slid 0.63%, while the Standard & Poor’s 500 retreated 0.31%. The Nasdaq Composite index slipped 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 0.78%.^1,2,3

Market Takes a Pause

After moving higher on Congressional approval of a $1 trillion-plus infrastructure spending bill, stocks drifted lower as investors took a breather after a weeks-long run-up in prices. A high October inflation report on Wednesday sent bond yields higher and stock prices lower, especially technology and other high growth companies. Energy also fell.^4,5

Higher-than-expected inflation elevated investor worries that the Fed may be forced to accelerate its bond tapering schedule and hike interest rates sooner than planned. Stocks found firmer footing following the inflation-related sell-off, closing the week on a strong note, though it wasn’t sufficient to keep stocks from ending the week in the red

Hot! Hot! Hot!

Rising prices appear to be showing no signs of moderating. The first reading on inflation was Tuesday’s release of the Producer Price Index, which saw wholesale prices rise 0.6% in October and register an 8.6% increase from 12-months ago.⁴

A day later the Consumer Price Index came in above consensus estimates, with prices climbing 0.9% from September 2021 and increasing 6.2% year-over-year. The 12-month increase was the sharpest such rise since 1990. The 12-month core inflation rate (excludes the more volatile food and energy sectors) was 4.6%, the fastest pace since 1991.⁵

1. ^{The Wall Street Journal, November 12, 2021}
2. ^{The Wall Street Journal, November 12, 2021}
3. ^{The Wall Street Journal, November 12, 2021}
4. ^{CNBC, November 9, 2021}
5. ^{The Wall Street Journal, November 10, 2021}

Every year, the IRS suggests doing what it calls a “Paycheck Checkup.” Check your withholding status if you:

• Get married or divorced
• Give birth to or adopt a child
• Buy a house
• Retire
• File for bankruptcy
• Get a new job or lose a job

The IRS also suggests checking on any streams of taxable income that are not subject to withholding, such as interest, dividends, capital gains, self-employment income, or retirement plan distributions. You also should check your withholding if you’ve experienced changes to your medical expenses, taxes, charitable gifts, education credits, dependent care expenses, and more. These life changes might affect your deductions or tax credits. Paycheck Checkups may help you better manage the process of filing taxes.

* 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.gov⁷

 

7. ^{IRS.gov, January 22, 2021}

Weekly Market Insights: Earnings Build; GDP Slows

A fresh wave of positive corporate earnings surprises sent markets to new record highs last week.

The Dow Jones Industrial Average increased 0.40%, while the Standard & Poor’s 500 rose 1.33%. The Nasdaq Composite index picked up 2.71% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 0.68%.^1,2,3

Earnings Drive Market

The week kicked off with the Dow Jones Industrials and S&P 500 index setting record highs as the financial markets carried over the previous week’s price momentum.⁴

Stocks continued to climb on a string of forecast-beating earnings results. With about half of the S&P 500 constituent companies having reported earnings, more than 80% of them have beaten Wall Street analysts’ consensus estimates. Based on these results, earnings for all S&P 500 companies are expected to come in approximately 39% above the third quarter of last year. (Forecasts are based on assumptions, and may not materialize.) Stocks overcame disappointing earnings from two mega-cap tech names on Friday to maintain the week’s solid gains.⁵

GDP Growth Slows

While businesses managed to post strong earnings in the third quarter, the first look at economic growth came in below consensus estimates. The Gross Domestic Product (GDP) grew at a 2.0% annualized rate in the third quarter, a slowdown from the two previous quarters, each of which posted annualized growth rates in excess of 6%.⁶

The spread of the Delta variant and backlogs in the supply chain were two major factors dragging on economic activity.

 

1. ^{The Wall Street Journal, October 29, 2021}
2. ^{The Wall Street Journal, October 29, 2021}
3. ^{The Wall Street Journal, October 29, 2021}
4. ^{CNBC, October 24, 2021}
5. ^{CNBC, October 28, 2021}
6. ^{The Wall Street Journal, October 28, 2021}

Here are a few things to know when attempting to protect yourself against identity thieves:

The 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 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://”).

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

* 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.gov⁷

Stocks rallied last week on a stream of positive corporate earnings surprises.

The Dow Jones Industrial Average rose 1.08%, while the Standard & Poor’s 500 advanced 1.64%. The Nasdaq Composite index gained 1.29% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 0.23%.^1,2,3

Earnings Ignite Rally

Fears over inflation, supply shortages, and slowing economic growth in China were pushed aside last week as investors reacted to a daily succession of positive corporate earnings surprises. After the Dow Industrials reached an all-time high intraday on Wednesday, fresh earnings reports, an increase in existing home sales, and a new pandemic low in initial jobless claims–and continuing claims–propelled the S&P 500 index to a new record high the following session.^4,5

Disappointing earnings before the market opened on Friday hurt a few social media stocks, resulting in a choppy trading session and a selloff in the Nasdaq to close out the week.

Solid Start To Season

Investors came into the earnings season anxious about whether businesses could extend the earnings growth momentum of recent quarters amid an increase in Delta infections, inflation, labor shortages, and supply-chain bottlenecks. The early results were encouraging. Of the 23% of companies comprising the S&P 500 index that have reported, 84% beat Wall Street consensus earnings estimates by an average of more than 13%.⁶

The earnings season may get more uneven in coming weeks since many of the companies potentially affected by labor shortages and inflation have yet to report. Nevertheless, these better-than-expected earnings buoyed investor spirits and allowed stocks to build on their October gains.

1. ^{The Wall Street Journal, October 22, 2021}
2. ^{The Wall Street Journal, October 22, 2021}
3. ^{The Wall Street Journal, October 22, 2021}
4. ^{CNBC, October 20, 2021}
5. ^{The Wall Street Journal, October 21, 2021}
6. ^{FactSet, October 22, 2021}

The IRS makes it easy to check various organizations’ status to ensure that they are eligible to receive tax-deductible contributions. It provides a tool, Tax Exempt Organization Search, which allows users to research an organization quickly and easily, using information such as the organization’s name, Employee Identification Number, and location.

In addition to finding out whether an organization is eligible to receive tax-deductible donations, users also automatically can see whether any organizations’ tax-exempt status has been revoked (which happens if they don’t file their required Form 990-series for three years in a row), as well as access IRS determination letters that recognize the organization as tax-exempt, among other information.

* 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.gov⁵

5. IRS.gov, February 26, 2021

A strong opening to the third-quarter earnings season sparked a late week, broad-based rally that helped stocks finish the week with solid gains.

The Dow Jones Industrial Average rose 1.58%, while the Standard & Poor’s 500 added 1.82%. The Nasdaq Composite index led, gaining 2.18% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 1.37%.^1,2,3

Investor Optimism Returns

After beginning the week on a lackluster note, stocks turned higher on Wednesday as companies kicked off a new earnings season and details about the Fed’s taper plans emerged. Investor enthusiasm shifted into high gear the following day on positive economic data and earnings reports that exceeded investor expectations. Buying continued through Friday on fresh earnings surprises and a better-than-expected retail sales report.

The economic data allayed some concerns about inflationary pressures and economic deceleration, while early earnings results provided hope that companies had weathered the surge in summer Covid infections. Nevertheless, worries about how supply-chain disruption and higher prices may impact corporate earnings guidance haven’t gone away.

Let the Tapering Begin

Minutes from September’s Federal Open Market Committee released last week provided detail around the Fed’s plans to taper its $120 billion monthly bond purchase program. The Fed expects to reduce its purchases by $15 billion each month, beginning in mid-November/December and ending in June 2022.⁴

This tapering schedule is somewhat faster than what investors were anticipating, reflecting the Fed’s concern that inflation has been somewhat higher and more persistent than it had anticipated, with continuing supply-chain bottlenecks raising that risk level. Fed Chair Powell’s commitment to transparency and advanced signaling of policy changes appeared to have worked, as markets greeted the news calmly. In fact, stocks rallied strongly the following day as yields moved lower.

1. ^{The Wall Street Journal, October 15, 2021}
2. ^{The Wall Street Journal, October 15, 2021}
3. ^{The Wall Street Journal, October 15, 2021}
4. ^{The Wall Street Journal, October 13, 2021}

Individuals, companies, corporations, partnerships, associations, trusts, and estates all are required to 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 that were 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.

Luckily, reporting cash payments is simple. 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 both 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.gov⁷

7. ^{IRS.gov, April 15, 2021}

The overhang of bumping against the federal debt ceiling was lifted last week with an agreement to extend the debt ceiling through early December, helping propel stocks to a weekly gain.

The Dow Jones Industrial Average increased by 1.22%, while the Standard & Poor’s 500 added 0.79%. The Nasdaq Composite index gained 0.09%. The MSCI EAFE index, which tracks developed overseas stock markets, was flat (+0.11%).^1,2,3

Debt Ceiling Concerns Evaporate, for Now

After suffering losses on concerns over delays with raising the federal debt ceiling, stocks rebounded as the Senate moved toward finalizing a debt ceiling agreement. While the agreement is only a short-term solution, it was enough to embolden investors to buy stocks.

The week’s rally ran out of gas on Friday, however, on a surprisingly weak employment report. Though the debt ceiling was the dominant concern in the markets last week, the market grappled all week with the headwinds of higher energy prices, rising bond yields, inflation, and less robust economic growth.

Fuzzy Employment Picture

Employment remains a confusing and unpredictable element of this post-pandemic economic recovery. Automated Data Processing’s employment report showed private sector jobs rose by a robust 568,000. This hiring surge may have been aided by the end of extended unemployment benefits and the return of children to school.⁴

This improving labor outlook was reinforced the following day as weekly initial jobless claims fell below their four-week moving average, while continuing claims fell by nearly 100,000. The employment report on Friday was a different story. The economy added a disappointing 194,000 jobs, making September the slowest month for job growth this year. The unemployment rate declined to 4.8%, while an increase in wages generated inflation worries.^5,6

1. ^{The Wall Street Journal, October 8, 2021}
2. ^{The Wall Street Journal, October 8, 2021}
3. ^{The Wall Street Journal, October 8, 2021}
4. ^{CNBC, October 6, 2021}
5. ^{CNBC, October 7, 2021}
6. ^{The Wall Street Journal, October 8, 2021}

Let’s outline who the 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 take care of 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 $4,300 or more.
• The qualifying person filed a joint return.
• The taxpayer or spouse, if filing jointly, 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.gov⁶

6. ^{IRS.gov, June 10, 2020}