Market-Moving News[i]
Market pullback
Weak labor market data and uneven earnings weighed on stocks as the S&P 500 and the NASDAQ fell for the third week in a row and the Dow snapped a four-week string of gains. The sell-off intensified on Friday, and the downturn left the S&P 500 5.7% below the record high that it achieved on July 16; the NASDAQ was in a correction, down 10.0% from its July 10 record.
Mixed results
The biggest technology companies reported uneven results as earnings season moved past the halfway point. As of Friday, FactSet reported that analysts were expecting S&P 500 companies overall to post an 11.5% second-quarter earnings increase compared with the same quarter a year earlier, based on results released so far and projections for companies that haven’t yet reported. Entering earnings season, the projected growth rate was 8.9%.
Jobs slowdown
Stocks fell sharply on Friday after U.S. jobs growth slowed for the third month in a row and the unemployment rate rose to the highest level in nearly three years. July’s gain of 114,000 jobs came in below expectations and was far short of the 12-month average of 215,000. The unemployment rate rose to 4.3% from 4.1% the previous month.
July by the numbers
Despite a negative momentum shift at mid-month, the S&P 500 finished July with a 1.1% gain as the index posted its eighth positive month out of the past nine. The Dow outperformed its peers with a 4.4% gain while the NASDAQ lagged, declining 0.8%.
Fed pivot outlook
The U.S. Federal Reserve again held off on cutting interest rates, but stocks climbed after Chair Jerome Powell said that an initial reduction could be on the table for its next meeting in mid-September if inflation continues to ease. The Fed also pivoted in its updated policy statement, which suggested that officials are attentive to concerns about labor market weakening in addition to inflation risks.
Gold’s allure
Gold futures pushed their record levels higher, and the commodity briefly topped the $2,500-per-ounce level on Friday for the first time ever. As of Friday afternoon, the price was up 4% for the week; year to date, the price was up about 20%.
Yields slide
The shifting interest-rate outlook and fresh economic data fueled a price rally for government bonds, sending the yield of the 10-year U.S. Treasury bond to around 3.80% on Friday to the lowest level in eight months. Yields of 2- and 30-year notes also fell sharply for the week to levels not seen since late last year.
Policy divergence
While the U.S. Federal Reserve kept its key interest rate unchanged on Wednesday, two other central banks shifted their policies, with one cutting rates and the other raising them. The Bank of England cut its key rate for the first time in four years, while the Bank of Japan raised its benchmark rate, citing concerns about weakness in Japan’s currency, the yen.
The Week Ahead: Aug 5-9
- Monday
- Institute for Supply Management’s nonmanufacturing index
- Tuesday
- Trade balance, U.S. Census Bureau
- Wednesday
- Consumer credit, U.S. Federal Reserve
- Thursday
- Wholesale inventories, U.S. Census Bureau
- Weekly unemployment claims, U.S. Department of Labor
- Friday
- No major reports scheduled
- No major reports scheduled
Philosophy Quote of the Week[ii]
The Good Life is Anywhere
“At this moment you aren’t on a journey, but wandering about, being driven from place to place, even though what you seek – to live well – is found in all places. Is there any place more full of confusion than the Forum? Yet even there you can live at peace, if needed.”
Seneca, Moral Letters, 28.5b-6a
Tax Tips[iii]
Higher Education Costs Can Reduce Taxes
School starts next week! Let’s discuss some school tax benefits!
Tuition Expenses
Tuition expense credits are available up to $4,000. They are limited, based on AGI. Parents can take this deduction if paying for education expenses for themselves, or their children and other dependents, if they claim the child or dependent on the tax return. Only claim what you pay for, using form 1098-T information. Form 1098-T comes to the address of the student, so have your kids/dependents on the lookout for it!
The American Opportunity Credit
This credit is worth up to $2,500 per eligible student and is available for the first four years at an eligible college or vocational school. It is subtracted from your taxes but can also give you a refund of up to $1,000 if it’s more than your taxes. Students earning a degree or other recognized credential and attending at least half-time are eligible. It is used for the cost of tuition, books, and required fees and supplies.
The Lifetime Learning Credit
This credit is worth up to $2,000 per tax return, per year, regardless how many students qualify. It is for all years of higher education, including classes for learning or improving job skills. It is limited to the amount of your taxes for the cost of tuition and fees, books, supplies and equipment purchased from the school.
Important Points for Each Credit
- The school issues a Form 1098-T, Tuition Statement. Ensure it’s correct and don’t forget it goes to your student’s address.
- File Form 8863, Education Credits, to claim these credits.
- If someone claims you as a dependent, you cannot claim either credit.
- You can’t claim both credits for the same student or for the same expense in the same year.
- The credits are subject to income limits that could reduce the amount you can claim on your return.
- Employers can deduct up to $5,250 (for 2023) as Post-Secondary Education Degree Program Expenses, per employee, through the business, without the employee paying taxes on the money. This will save taxes for the employee and the employer. Consider hiring your family and certain college expenses can be a deduction in the business, if the class is necessary for the employee’s job.
- Employers can also deduct College Education classes pai for employees. The Employer’s company may pay for the college classes for employees if there is no discrimination among employees and if the classes will improve the existing job skills of the employees taking the class.
Health Tip of the Week[iv]
3 sun safety reminders
Although your skin needs sun for vitamin D, it also needs to be protected from the sun's harmful ultraviolet rays. Those sunny rays, which may be appreciated after a long winter, also can cause skin cancer. Skin cancer is among the most common types of cancer in the U.S. and also the most preventable.
As a physician and a father of three children, I often provide these sun safety reminders to patients and their families.
Choose the right sunscreen.
It's best to stay out of sunlight when the sun is most direct, usually between 10 a.m. and 3 p.m. But when you are in the sun, choosing a good sunscreen is critical.
Don't get caught up in brand names, but don't choose the cheapest product. Go with a well-rated lotion or spray that has the right SPF for your needs. There is minimal extra protection for sunscreens that claim sun protection factor, or SPF, ratings higher than 50. Use a sunscreen with an SPF of 30 or 50 on your face, ears, nose and other areas of prolonged sun exposure, especially when you're spending the day at the pool or lake. Use SPF 15 or 30 for all other areas of the body that are exposed to the sun. Apply sunscreen every hour when playing or sweating in the sun, or playing at the pool. Waterproof sunscreen can last somewhat longer, but everyone's skin is different. One tip my wife uses is to set her phone alarm to go off every hour when we are at the pool as a reminder to reapply sunscreen. Babies 6 months and younger should not use sunscreen, so be sure to keep them covered or in a shady spot.
There's been some concern recently as to the absorption of titanium oxide and zinc oxide found in most sunscreens. If these were absorbed would it be toxic to our bodies? Studies reveal these compounds do not get below the stratum corneum layer, which is one of the outer most skin layers, before naturally sloughing off. Most sunscreens are well-tolerated with no concerns for reactions due to absorption.
Some sunscreens can cause allergic reactions to you or your child's skin. If this happens, remove immediately, and try a different or more natural brand of sunscreen. If you continue to have a worsening rash, or swelling of lips or throat, you need to be seen by a medical professional immediately.
Another issue is some sunscreen can be irritating to the skin and cause dermatitis or photosensitivity over time. Many of these sunscreens contained para-aminobenzoic acid (PABA), but now this component is rarely used by sunscreen manufacturers.
Wear sunglasses.
Sunglasses can protect your eyes from the brightness of the sun, but make sure they're UV-filtered. Without that, you actually expose your eyes to the UV rays worse than if you weren't wearing sunglasses at all.
Wear a hat.
While hats do help when you and your family are outdoors, remember that baseball caps usually only protect the face but not your ears or neck, which are common areas skin cancers can develop later in life. Broad-brimmed hats are better but can be challenging with kids as they may not necessarily be something they want to wear. So, be sure to repeat applications of sunscreen to exposed areas.
Using sunscreen and wearing clothing that protects you from the sun can greatly reduce your risk of developing skin cancer. Protect your skin to have a great summer.
Graham King, M.D., is a physician in Family Medicine in Mankato, Minnesota.
[i]https://www.jhinvestments.com/weekly-market-recap#investment-returns, accessed 08.02.2024.
[ii] Holiday, Ryan. The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living. Kindle edition, page 232. Accessed 08.05.2024.
[iii] Hockensmith, Robert F. 52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money. Kindle edition, page 141-143, accessed 08.05.2024.
[iv]https://www.mayoclinichealthsystem.org/hometown-health/speaking-of-health/3-sun-safety-reminders, accessed 08.05.2024.