THE WEEK ON WALL STREET
Stocks advanced last week despite some intra-week volatility as investors showed concern about the economy's strength. The S&P 500 Index gained 1.47 percent, while the Nasdaq Composite Index picked up 2.58 percent. The Dow Jones Industrial Average added 0.55 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, tacked on 2.53 percent.
FACT OF THE WEEK
Pluto, once believed to be the ninth planet, is discovered at the Lowell Observatory in Flagstaff, Arizona, by astronomer Clyde W. Tombaugh.
The existence of an unknown ninth planet was first proposed by Percival Lowell, who theorized that wobbles in the orbits of Uranus and Neptune were caused by the gravitational pull of an unknown planetary body. Lowell calculated the approximate location of the hypothesized ninth planet and searched for more than a decade without success.
However, in 1929, using the calculations of Lowell and W.H. Pickering as a guide, the search for Pluto was resumed at the Lowell Observatory in Arizona. On February 18, 1930, Tombaugh discovered the tiny, distant planet by use of a new astronomic technique of photographic plates combined with a blink microscope. His finding was confirmed by several other astronomers, and on March 13, 1930—the anniversary of Lowell’s birth and of William Herschel’s discovery of Uranus—the discovery of Pluto was publicly announced.
MARKET MINUTE
The Fed Is in “No Hurry”
Stocks opened the week higher, quickly discounting news that the White House would impose 25 percent tariffs on all steel and aluminum imports. Tuesday was a volatility session, punctuated by comments from Fed Chair Powell, who told lawmakers the central bank doesn’t “need to be in a hurry” to lower interior rates further. Stocks opened lower Wednesday after a warmer-than-expected update on consumer prices. But stocks showed some resilience and rallied throughout the day. The Nasdaq managed to claw back its losses before Wednesday's close.
On Thursday, the White House announced a plan for reciprocal tariffs (levies on goods imported into the U.S. from countries that impose tariffs on U.S.-exported goods). But markets rallied on news that the administration would pause tariffs until they determine how much to levy on each country. Stocks took a breather on Friday, shrugging off a weaker-than-expected retail sales report. The S&P ended shy of a record close, and the Nasdaq finished the week above the 20,000 mark.
Inflation in Focus
The Consumer Price Index report showed prices rose 0.5 percent in January–slightly hotter than expected. Shelter costs remained elevated, increasing 0.4 percent for the month. Core CPI, which excludes volatile food and energy prices, was also above forecast. Food prices rose 0.4 percent, pushed by a 15.2 percent increase in egg prices related to ongoing issues forcing farmers to cull chicken flocks. Energy prices picked up 1.1 percent as gasoline prices rose.
FINANCIAL STRATEGY OF THE WEEK
How to Make the Tax Code Work for You
By May 15, 2023, over 142 million taxpayers had dutifully filed their federal income tax returns. And they all made decisions about deductions and credits – whether or not they realized it.
When you take the time to learn more about how it works, you may be able to put the tax code to work for you. A good place to start is with two important tax concepts: credits and deductions.
Please consult legal or tax professionals for specific information regarding your individual situation.
Credits
As tax credits are usually subtracted, dollar for dollar, from the actual tax liability, they potentially have greater leverage in reducing your tax burden than deductions. Tax credits typically have phase-out limits, so consider consulting a legal or tax professional for specific information regarding your individual situation.
Here are a few tax credits that you may be eligible for:
- The Child Tax Credit is a federal tax credit for families with dependent children under age 17. The maximum credit is $2,000 per qualifying child, depending on your income level.
- The American Opportunity Credit provides a tax credit of up to $2,500 per eligible student for tuition costs for four years of post-high-school education.
- Those who have to pay someone to care for a child (under 13) or other dependent may be able to claim a tax credit for those qualifying expenses. The Child and Dependent Care Credit provides up to $4,000 for one qualifying individual or up to $8,000 for two or more qualifying individuals.
Deductions
Deductions are subtracted from your income before your taxes are calculated, and thus, may reduce the amount of money on which you are taxed, and by extension, your eventual tax liability. Like tax credits, deductions typically have phase-out limits, so consider consulting a legal or tax professional for specific information regarding your individual situation.
Here are a few examples of deductions.
- Under certain limitations, contributions made to qualifying charitable organizations are deductible. In addition to cash contributions, you can potentially deduct the fair market value of any property you donate. And you may be able to write off out-of-pocket costs incurred while doing work for a charity.
- If certain qualifications are met, you may be able to deduct the mortgage interest you pay on a loan secured for your primary or secondary residence.
- Amounts set aside for retirement through a qualified retirement plan, such as an Individual Retirement Account, may be deducted. The contribution limit is $7,000, and if you are age 50 or older, the limit is $8,000.
- In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA) or qualified retirement plan. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
- You may be able to deduct the amount of your medical and dental expenses that exceed 7.5% percent of your adjusted gross income.
Understanding credits and deductions is a critical building block to making the tax code work for you. But remember, the information in this article is not intended as tax or legal advice. And it may not be used for the purpose of avoiding any federal tax penalties.