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Weekly Market Insights: Fed Rate Changes Are Anticipated

Weekly Market Insights: Fed Rate Changes Are Anticipated

May 20, 2024

Stocks recorded a substantial increase last week in a rally led by large-cap tech stocks, supported by positive inflation reports.

Dow 40,000

The week started off quietly as market averages traded in a tight range while waiting for fresh inflation news. On Tuesday, markets steadily rose throughout the day after digesting a mixed wholesale inflation report. The following day, a cooler-than-expected Consumer Price Index (CPI) report sparked a broad-based rally as the upbeat news raised investors' hopes for a rate cut. The Nasdaq Composite and Standard & Poor's 500 (which closed above 5300 for the first time) both ended the day up 1.4 percent and 1.2 percent, respectively. Meanwhile, the bellwether 10-year Treasury yield fell to 4.35 percent. Investors took a break as the week ended, mostly yawning at mixed economic data. Notably, the Dow closed just above 40,000 on Friday.

Source: YCharts.com, May 18, 2024. Weekly performance is measured from Monday, May 13, to Friday, May 17.
TR = total return for the index, which includes any dividends as well as any other cash distributions during the period.
Treasury note yield is expressed in basis points.

Inflated Expectations

Last week, there were two important updates on inflation. This drew attention to what the Federal Reserve might do next with interest rates. While the top-level CPI numbers (known as headline inflation) are usually not as significant as core inflation (CPI minus volatile food and energy prices) in the eyes of the Fed, the core CPI for April was 0.29 percent, slightly below Wall Street's forecast of 0.30 percent. This was the first time in three months that the core CPI was lower than expected. This news has led to speculation that the Fed might consider adjusting rates as early as September.

This Week: Key Economic Data

Monday: Fed Officials Michael Barr, Raphael Bostic, Christopher Waller, and Philip Jefferson speak for the first time. 

Tuesday: Fed Officials Michael Barr, Raphael Bostic, Christopher Waller, and Philip Jefferson speak again. John Williams speaks for the first time for the week.

Wednesday: Existing Home Sales. 20-Year Treasury Bond Auction. FOMC Meeting Minutes.

Thursday: Jobless Claims. New Home Sales. Fed Balance Sheet.

Friday: Durable Goods. Consumer Sentiment.

Source: Investors Business Daily - Econoday economic calendar;  May 17, 2024
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

This Week: Companies Reporting Earnings

Monday: Palo Alto Networks, Inc. (PANW)

Tuesday: Lowe’s Companies, Inc. (LOW)

Wednesday: NVIDIA Corporation (NVDA), The TJX Companies, Inc. (TJX), Target Corporation (TGT)

Thursday: Intuit Inc. (INTU)

Source: Zacks, May 17, 2024
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

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Food For Thought

"The most difficult thing is the decision to act, the rest is merely tenacity."

– Amelia Earhart

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Tax Tip

Starting a New Hobby? These Tips Can Help You Understand the Tax Situation

When starting a new hobby, it's important to consider the tax implications, especially if you plan to turn your hobby into a business. Taxpayers are required to report any income earned from hobbies, even if it's not a licensed business. The IRS provides nine factors to help determine whether a hobby could be considered a business:
1. Whether the activity is conducted in a businesslike manner with complete and accurate records.
2. Whether personal motives are involved in the activity.
3. Whether the time and effort put into the activity indicate an intention to make a profit.
4. Whether the activity provides income for livelihood.
5. Whether losses are due to circumstances beyond control or are normal in the startup phase.
6. Whether you or your financial professional understand how to turn the activity into a successful business.
7. Whether you made a profit through similar activities in the past.
8. Whether the activity will make a profit in some years and how much profit it will make.
9. Whether you can profit from appreciating the assets used in the activity.
Taxpayers can also deduct some hobby expenses within certain limits. Ordinary and necessary hobby expenses can typically be deducted. An ordinary expense is common and accepted for the activity, while a necessary expense is appropriate.

*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

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Healthy Living Tip

3 Stretches for Your Lower Back

We often spend a lot of time sitting in our cars and at our desks, which can lead to tightness and soreness in our lower backs. These three lower back stretches can help improve flexibility, aid recovery, and provide relief from lower back pain.

1. Figure 4 Stretch: Lie on your back with both feet on the ground. Cross your left foot over your right knee and gently bring your right leg to a 90-degree angle. To increase the stretch, you can grab the back of your thigh and bring your right knee toward your torso. Repeat on the other side.

2. Inner Thigh Stretch/Butterfly Stretch: Sit on the ground with the soles of your feet touching and your knees falling to the side. To intensify the stretch, bring your feet closer to your torso.

3. Pigeon Pose: Bring one leg to a 90-degree angle from your torso and stretch the other leg behind you so your calf is perpendicular to your hips. To intensify the stretch, bend at the hips over your front leg. Repeat on both sides.

Tip adapted from Very Well Fit7

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Riddle Of The Week

Rigid is my spine, my innards are mostly pale, yet I am always ready to tell a tale. What am I?

  

Last week’s riddle: What should the following number be in this series: 103, 107, 109, 113, 127, ___ ?  Answer: 131, as the whole series is made up of prime numbers.

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Photo Of The Week

Bullring Shopping Centre Birmingham, England, UK

Footnotes and Sources


1. CNBC.com, May 14, 2024

2. The Wall Street Journal, May 15, 2024

3. CNBC.com, May 17, 2024

4. CNBC.com, May 14, 2024

5. The Wall Street Journal, May 15, 2024

6. IRS.gov, November 15, 2023

7. Very Well Fit, January 24, 2023

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

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