THE WEEK ON WALL STREET
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 S&P 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%.
FACT OF THE WEEK
On July 24, 1911, American archeologist Hiram Bingham gets his first look at the ruins of Machu Picchu, an ancient Inca settlement in Peru that is now one of the world’s top tourist destinations.
Tucked away in the rocky countryside northwest of Cuzco, Machu Picchu is believed to have been a summer retreat for Inca leaders, whose civilization was virtually wiped out by Spanish invaders in the 16th century. For hundreds of years afterwards, its existence was a secret known only to the peasants living in the region. That all changed in the summer of 1911, when Bingham arrived with a small team of explorers to search for the famous “lost” cities of the Incas.
Traveling on foot and by mule, Bingham and his team made their way from Cuzco into the Urubamba Valley, where a local farmer told them of some ruins located at the top of a nearby mountain. The farmer called the mountain Machu Picchu, which meant “Old Peak” in the native Quechua language. The next day—July 24—after a tough climb to the mountain’s ridge in cold and drizzly weather, Bingham met a small group of peasants who showed him the rest of the way. Led by an 11-year-old boy, Bingham got his first glimpse of the intricate network of stone terraces marking the entrance to Machu Picchu.
The excited Bingham spread the word about his discovery in a best-selling book, sending hordes of eager tourists flocking to Peru to follow in his footsteps up the Inca trail. The site itself stretches an impressive five miles, with over 3,000 stone steps linking its many different levels. Today, more than 300,000 people tramp through Machu Picchu every year, braving crowds and landslides to see the sun set over the towering stone monuments of the “Sacred City” and marvel at the mysterious splendor of one of the world’s most famous man-made wonders.
MARKET MINUTE
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. 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%. 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.
FINANCIAL STRATEGY OF THE WEEK
Tax Rules When Selling Your Home
How the gains from the sale of a primary residence are taxed has changed in recent years. If you have recently sold your home or are considering doing so, you may want to be aware of these new rules.
Home Sale
If you owned and lived in your home for two of the last five years before the sale, then up to $250,000 of profit may be exempt from federal income taxes. If you are married and file a joint return, then it doubles to $500,000.
To qualify for this exemption, you cannot have excluded the gain on the sale of another home within two years of this sale. Please consult a professional with tax expertise regarding your individual situation.
This profit would be excluded from your taxable income. In fact, the sale may not need to be reported unless you receive a Form 1099-S or do not meet the above requirements.If you sold your home at a loss, unfortunately, you can't deduct the loss.
There Are Exceptions
Even if you do not meet the above requirements, you may qualify for this exclusion:
- If you receive the house in a divorce settlement.
- If you are able to count short-term absences as time lived in the house.
- If a surviving spouse who has not remarried can count the time that the deceased spouse lived in the house.
The five-year test period can also be suspended for up to ten years in cases where any spouse has served on "qualified official extended duty" as a member of the military, foreign service, or federal intelligence agencies. Even if you don't pass the five-year rule test, a reduced exclusion may be available if you have a change in employment or health, or because of unforeseen circumstances, such as divorce or multiple births from a single pregnancy. Please speak with a professional with tax expertise regarding your situation.