THE WEEK ON WALL STREET
There were mixed results for stocks last week as upbeat economic data and a critical Q2 corporate report shaped the week.
The Dow Jones Industrial Average rose 0.94 percent, while the S&P 500 Index increased 0.24 percent. The Nasdaq Composite lagged, falling 0.92 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, gained 0.35 percent.
FACT OF THE WEEK
On September 7, 1813, the United States gets its nickname, Uncle Sam. The name is linked to Samuel Wilson, a meat packer from Troy, New York, who supplied barrels of beef to the United States Army during the War of 1812. Wilson (1766-1854) stamped the barrels with “U.S.” for the United States, but soldiers began referring to the grub as “Uncle Sam’s.” The local newspaper picked up on the story, and Uncle Sam eventually gained widespread acceptance as the nickname for—and personification of—the U.S. federal government.
MARKET MINUTE
Key Economic Data
Markets began the week quiet as investors awaited Q2 earnings from Nvidia, the world’s most influential name in artificial intelligence. The chipmaker–the second largest stock in the S&P 500 by market capitalization–dipped on the news, putting pressure on the Nasdaq and S&P 500. (The Nasdaq and S&P 500 are market-weighted averages, so larger companies have an outsized impact.) Nvidia is mentioned to show its influence on the overall stock market. It should not be considered a solicitation for the purchase or sale of the company. On Thursday, an upward revision in Gross Domestic Product (GDP) data boosted markets, although stocks fell later in the day. Friday’s Personal Consumption and Expenditures (PCE) data seemed to confirm that inflation remained tame, welcome news for investors who are anticipating the Fed may adjust rates in September.
Softer Landing in Focus?
Several pieces of data helped build a narrative that the economy may be coming in for a soft landing. Second-quarter GDP growth was revised upward, from 2.8 percent to 3.0 percent. That’s an improvement from Q1 GDP, which rose 1.4 percent. Some market watchers were concerned about the Q2 revision after pending home sales in July hit its lowest monthly level in 23 years. Meanwhile, the Federal Reserve’s preferred measure of inflation, the PCE Index, came in 0.2 percent higher in July–in line with expectations. Core PCE inflation, which the Fed tracks closely, edged up 0.2 percent–also in line with forecasts.
FINANCIAL STRATEGY OF THE WEEK
What Can You Buy With 529 Distributions?
Some of the biggest challenges many face when it comes to education are financial. Luckily, a 529 college saving plan can help. And they're not just for college anymore - added to the tuition eligibility are K-12, private and religious schools. These funds can also be used for four and two-year colleges, trade schools, graduate programs, and some international institutions.
A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. State tax treatment of 529 plans is only one factor to consider prior to committing to a savings plan. Also, consider the fees and expenses associated with the particular plan. Whether a state tax deduction is available will depend on your state of residence. State tax laws and treatment may vary. State tax laws may be different from federal tax laws. Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty tax.
Here's a list of 529 qualified educational expenses:
Educational Strategy
To take advantage of the 529 distribution for educational costs, you must submit your request for the funds during the same calendar year. If you request cash during the academic year, you may end up owing taxes as a non-qualified withdrawal.
- Higher Education - Post-secondary students (after high school) are eligible to participate in the federal student aid program administered by the U.S Department of Education and qualify for the use of 529 funds.
- Vocational or Trade School - Culinary students can draw from their 529 accounts to pay expenses related to culinary institute courses. The institution must participate in the U.S Department of Education for federal student aid.
- Early Education - K-12 schools, public, private, and religious institutions can now use 529 plan distributions up to $10,000 per student for tuition.
Lifestyle and School Supplies
Learning how best to use your 529 distributions while establishing a manageable budget for qualified and non-qualified purchases can be tricky. Here are some tips to keep in mind.
- Housing - Campus housing can be paid through 529 distributions, including college room and board fees. Off-campus housing rentals qualify up to the same cost of the room and board on campus.
- Books and Supplies - paper, pens, and textbooks required by the specific course are qualified expenses. Schools set the budget limit for books and supplies.
- Needs and Services - Special needs equipment and services qualify for 529 distribution. Students using equipment for mobility may be eligible for 529 distribution purchases. Depending on the circumstances, other modes of transportation may also apply.
Welcoming Technology
Finally, many don't realize that computers and some electronics are included on the list of qualified education expenses. Keep in mind that these items must be required as part of the students' study programs to qualify.
- Personal Computer - Computers must be used primarily by the student during any of the years the student is enrolled at the eligible educational institution.
- Software - software may qualify as a 529 distribution expense, but only if it's used by the student and required by a class. For example, technical engineering or design classes may involve computerized assignments.
- Internet - Lastly, under certain circumstances, internet services can be paid for using 529 funds. Check with your internet service provider (ISP) for more details.
The above tips are sure to help get you started, but make sure to check with the school as well as chat with your financial professional to learn more. As mentioned earlier, each state and school may have different restrictions on using 529 funds. If you are unsure about anything, your plan sponsor may be able to provide some guidance.