Uncategorized

Positive inflation data failed to lift stocks from their August doldrums last week as economic data and a ratings downgrade soured investor sentiment.

The Dow Jones Industrial Average added 0.62%, while the Standard & Poor’s 500 slipped 0.31%. The Nasdaq Composite index fell 1.90% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.50%.^1,2,3

Tech Weighs on Stocks

Stocks struggled last week, beginning on a strong note ahead of key inflation data and selling off mid-week in response to a downgrade of the banking sector by credit rating agency Moody’s and news of a steep drop in China’s exports. Emblematic of the week, stocks jumped to big gains following Thursday’s better-than-expected inflation report, only to evaporate as bond yields rose amid an auction of 30-year Treasury bonds.

Stocks have had difficulty sustaining traction with the loss of the technology’s leadership, which has propelled gains this year. The combination of higher yields and earnings that failed to validate tech’s elevated valuations has dragged the sector and the larger market.

Subdued Inflation

July’s inflation data reflected only moderate price pressures. Consumer prices increased by a modest 0.2%, which aligned with market expectations. In comparison, the annual inflation rate came in at 3.2%, slightly below consensus estimates–though higher than June’s annual increase of 3.0%. Core CPI (excludes food and energy) was particularly encouraging, rising at the slowest rate since October 2021.⁴

Producer prices painted a more mixed picture, coming in a bit higher than expected, rising 0.3% versus the expected 0.2% increase, though the year-over-year increase was just 0.8%. Core producer prices’ 12-month increase of 2.4% tied for the lowest since January 2021.⁵

Footnotes and Sources

1. ^{The Wall Street Journal, August 11, 2023}
2. ^{The Wall Street Journal, August 11, 2023}
3. ^{The Wall Street Journal, August 11, 2023}
4. ^{CNBC, August 10, 2023}
5. ^{CNBC, August 11, 2023}

On your tax return, add the Social Security Numbers for your children and other dependents. Otherwise, the Internal Revenue Service (IRS) might deny any dependent credits you might be due, including the Child Tax Credit.

If you don’t have the number you need by the tax filing deadline, the IRS suggests filing for an extension rather than sending in a return without a Social Security number.

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

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, October 7, 2022}

Stocks retreated last week as bond yields increased following the Treasury’s announcement indicating “a larger-than-expected funding need” and a downgrade in the federal government’s debt rating.

The Dow Jones Industrial Average dropped 1.11%, while the Standard & Poor’s 500 shed 2.27%. The Nasdaq Composite index lost 2.85% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tumbled 3.27%.^1,2,3

Stocks Struggle

Stocks struggled as investor sentiment turned cautious amid rising bond yields. Markets were rattled initially by news that the Treasury raised its borrowing requirement for the third quarter by more than a quarter of a trillion dollars and on news that the Bank of Japan announced it would allow bond yields to rise after years of capping them.

Rising yields continued to pressure stocks in the wake of a surprise rating downgrade of U.S. government debt by a major credit rating agency due to its belief in expected fiscal deterioration over the next three years.

Stocks rebounded Friday morning, rising on modest employment data only to reverse and add to the week’s losses.

Mixed Signals from the Labor Market

Fresh employment data last week gave some conflicting signals about the labor market. A new JOLTS (Job Openings and Turnover Survey) report showed a small decline in job openings and layoffs in June, leaving 1.6 job openings for each available worker.⁴

Automated Data Processing’s (ADP) employment report reflected strong private sector hiring with a 324,000 increase in jobs, exceeding the consensus forecast of a 175,000 gain.⁵

The government’s monthly employment report saw a cooling in hiring as employers added 187,000 jobs in July. This was slower than seen in the first six months but enough to shave the unemployment rate from 3.6% to 3.5%.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, August 4, 2023}
2. ^{The Wall Street Journal, August 4, 2023}
3. ^{The Wall Street Journal, August 4, 2023}
4. ^{CNBC, August 1, 2023}
5. ^{CNBC, August 2, 2023}
6. ^{The Wall Street Journal, August 4, 2023}

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 cannot care for themselves has 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 lives 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 $4,400 or more.
• The qualifying person filed a joint return.
• If filing jointly, the taxpayer or spouse could be claimed as dependent on someone else’s return.

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

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, May 1, 2023}

A Friday surge pushed stocks solidly into positive territory last week, ignited by cooling in an inflation gauge closely tracked by the Federal Reserve.

The Dow Jones Industrial Average advanced 0.66%, while the Standard & Poor’s 500 climbed 1.01%. The Nasdaq Composite index rose 2.02% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.74%.1,2,3

Stocks Pop

Stocks were flat for much of last week amid a batch of new earnings, a 0.25% interest rate hike, and strong economic data. After beginning with gains, stocks lost momentum following the Fed’s expected rate-hike announcement on Wednesday. A bounce on Thursday sparked by a positive mega-cap tech company earnings reversed after bond yields increased.

Stocks recovered strongly Friday on the release of the personal consumption expenditures price index, which fell to its lowest level in two years.⁴

Much of the market action was related to earnings results. With 44% of S&P 500 companies reporting, 78% have exceeded Wall Street forecasts.⁵

Recession Deferred

Expectations of a recession were high coming into 2023. Last week may have erased this recession narrative overhang.

Second-quarter gross domestic product (GDP) data released last week was one big reason why. Economic activity expanded by 2.4%, which was above the forecast of two percent and represented an acceleration from its first quarter GDP of 2.0%. Consumer spending was a major driver of that expansion, rising 1.6%.6

Joining the recession-deferred camp this week was Fed Chair Powell, who stated that the Fed was no longer forecasting a recession.

Footnotes and Sources

1. ^{The Wall Street Journal, July 28, 2023.}
2. ^{The Wall Street Journal, July 28, 2023.}
3. ^{The Wall Street Journal, July 28, 2023.}
4. ^{CNBC, July 28, 2023.}
5. ^{CNBC, July 27, 2023.}
6. ^{CNBC, July 27, 2023.}

There are some important tips to remember if you work a side gig:

• All income from these sources is taxable, including both full-time and part-time work and any cash payment received.
• As a gig worker, correctly classify yourself as an employee or an independent contractor; this can depend on where you live, even for the same services.
• Lastly, it’s important to consider paying quarterly taxes during the year to help avoid any federal or state tax penalties for underpayment.

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

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, January 12, 2023.}

Stocks moved to the rhythm of earnings season last week, initially rising on positive earnings surprises and faltering later in the week on key earnings disappointments.

The Dow Jones Industrial Average rose 2.08%, while the Standard & Poor’s 500 added 0.69%. The Nasdaq Composite Index slumped 0.57% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.32%.^1,2,3

Earnings in Focus

Entering its first big week of the second quarter earnings season, solid reports from the nation’s big banks rewarded investor optimism, sparking a rally that continued into mid-week. An announcement by a mega-cap tech company of a new AI subscription plan, and stabilizing deposits at several regional banks, further fed investor enthusiasm.

Disappointing earnings from two big-tech names dragged market indices lower on Thursday, with the largest losses in the Nasdaq composite. Despite the reversal, 20 stocks in the S&P 500 touched 52-week highs on Thursday, with 11 reaching all-time highs.⁴

Stocks closed flat to end an otherwise mixed week.

Housing Hits a Bump

June housing reports reminded investors that any emerging housing recovery remains shaky. After a massive 21.7% jump in housing starts in May, new home construction tumbled 8.0% in June, with building permits (an indicator of future home construction) dropping 3.7%.⁵

Sales of existing homes were also lower in June, declining by 3.3%, owing to a persistently low inventory level. This was the slowest pace since January. Year-over-year sales were lower by 18.9%. One reason for low inventory is that homeowners have been reluctant to sell homes on which many have a historically low mortgage rate and face buying a new home at elevated prices with a much higher mortgage interest rate.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, July 21, 2023.}
2. ^{The Wall Street Journal, July 21, 2023.}
3. ^{The Wall Street Journal, July 21, 2023.}
4. ^{CNBC, July 20, 2023.}
5. ^{Yahoo!Finance, July 19, 2023.}
6. ^{The Wall Street Journal, July 20, 2023.}

If you receive a cash payment over $10,000, you may be required to report it to the Internal Revenue Service (IRS). In this case, a cash payment includes US or foreign currency and can also include cashier’s checks, bank drafts, traveler’s checks, or money orders.

In addition, cash payments to an individual can also include payments from companies, corporations, partnerships, associations, trusts, or estates. For example, this could include:

• Dealers of jewelry, furniture, boats, aircraft, automobiles, art, rugs, and antiques
• Pawnbrokers
• Attorneys
• Real estate brokers
• Insurance companies
• Travel agencies

This requirement can apply to cash payments received in one lump sum or two or more payments over time. Check the IRS website for more specifics regarding what constitutes a reportable transaction.

So how do you report cash payments? Taxpayers should complete Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. You can file this form electronically or mail a copy to the IRS. You must submit Form 8300 within 15 days of receiving the cash payment.

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

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, February 15, 2023}

Better-than-expected updates last week on consumer and wholesale price inflation buoyed investor sentiment, driving stocks higher and lower bond yields.

The Dow Jones Industrial Average rose 2.29%, while the Standard & Poor’s 500 increased 2.42%. The Nasdaq Composite index advanced 3.32% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 4.67%.^1,2,3

Inflation Sparks Stocks

Back-to-back positive inflation reports emboldened investors, sending stocks to their highest levels since April 2022. Lower-than-forecast inflation on both consumer prices and producer prices sparked investor optimism that inflation may be able to fall further without tipping the economy into recession and provide the basis for the Fed to moderate its more hawkish rate hike stance.⁴

After four straight days of increases, investor attention turned to the kick-off of a new earnings season on Friday. Despite some positive earnings surprises from several big banks and a major healthcare provider, stocks closed out a good week with a slight decline.

Inflation Cools

Inflation continued its downward trend last month, falling at its slowest pace in over two years. Consumer prices rose 0.2% in June and 3.0% from a year ago. Both were below economists’ consensus forecast. Core inflation (excludes food and energy), which has been more stubborn, fell to 4.8% year-over-year–its lowest level since October 2021.⁵

The positive disinflationary story continued the following day with a lighter-than-forecast increase in producer prices. Wholesale prices increased 0.1% in June, which was lower than the consensus forecast of 0.2%. The increase from a year ago was also 0.1%, representing the smallest gain in nearly three years. Core producer price rose 2.6% year-over-year.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, July 14, 2023}
2. ^{The Wall Street Journal, July 14, 2023}
3. ^{The Wall Street Journal, July 14, 2023}
4. ^{The Wall Street Journal, July 13, 2023}
5. ^{The Wall Street Journal, July 12, 2023}
6. ^{The Wall Street Journal, July 13, 2023}

The Internal Revenue Service (IRS) has a tool called Free File, which offers online tax preparation, direct deposit of refunds, and electronic filing choices. This tool can be helpful for taxpayers on a fixed budget, including seniors and retirees. Here are some things to know about the tool:

• IRS Free File can be found at IRS.gov and features some big names in the tax software provider world.
• To use the tool, taxpayers can browse multiple offers.
• The eligibility standards for using Free File depend on the tax partner, but they are usually based on income, age, and state residency.
• Free File has a majority of the most common forms needed when filing your taxes. Even if you have a unique tax situation, you may still be able to use Free File.
• Some Free File products are available in Spanish.
• You can also search for credits and deductions in Free File.
• Some providers in Free File also offer state return preparation. You can use the lookup tool in Free File to find the tax partner that might be appropriate for your state requirements.
• Taxpayers can access Free File through their computers, smartphones, or tablets. The site is designed for mobile usage.

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

Tip adapted from IRS.gov⁶

Footnotes and Sources

6. ^{IRS.gov, January 23, 2023}