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Weekly Market Update, Week Ending May 31, 2024

Weekly Market Update, Week Ending May 31, 2024

June 03, 2024

Market-Moving News[i]

Stocks retreat

The major U.S. stock indexes all declined around 0.5% to 1.0%, with the S&P 500 and NASDAQ both snapping a string of five consecutive weekly gains that had lifted the indexes to record highs. The Dow posted its second negative week in a row.

Sideways inflation

The U.S. Federal Reserve’s preferred gauge for tracking inflation was little changed from the previous month and remained well above policymakers’ 2.0% long-term target rate. The Personal Consumption Expenditures Price Index rose at a 2.7% annual rate in April―the same as in March. Excluding food and energy prices, the rate has been stuck at 2.8% for three months in a row.   

May flowers

The S&P 500 climbed nearly 5% in May, rebounding from an April decline and posting its sixth positive month out of the past seven. The NASDAQ led with a gain of almost 7%; the Dow added more than 2%, as a late-month decline sent that index down from its first-ever 40,000-point closing level reached on May 17.

GDP downgrade

First-quarter U.S. economic growth wasn’t as strong as initially estimated. A downward adjustment of consumer spending data led to a revised annualized GDP figure of 1.3% versus an initial estimate of 1.6%. The growth rate was well below the 3.4% figure recorded in last year’s fourth quarter.

Inside Q1 earnings

Communication services posted the strongest earnings growth at the sector level in the recently completed earnings season with a 34% increase relative to the previous year’s first quarter, according to FactSet. The earnings laggard was healthcare, with a 25% decline. Across all S&P 500 sectors, average earnings growth was 6%.  

Yield volatility

U.S. Treasury bonds traded in a wide range during the week, with the yield of the 10-year bond at one point on Wednesday reaching as high as 4.64%, the highest level in four weeks. By Friday’s close, the 10-year yield had settled down to around 4.49%, up modestly from 4.47% at the end of the previous week.

Small-cap edge

An index of U.S. small-cap stocks was flat while a large-cap benchmark slipped, slightly narrowing large caps’ year-to-date margin of outperformance. The small-cap index was essentially unchanged for the week versus a 0.6% decline for the large-cap benchmark.

Jobs ahead

A monthly labor market report due out on Friday will show whether the recent trend of moderating jobs growth extended into May. In April, the economy generated 175,000 jobs, down from 315,000 in March. The unemployment rate rose slightly to 3.9% and wage growth slowed.

The Week Ahead:  June 3-7

  • Monday
    • Index for Supply Management’s manufacturing index
    • Construction spending, U.S. Census Bureau
  • Tuesday
    • Job Openings and Labor Turnover Survey, U.S. Bureau of Labor Statistics
    • Factory orders, U.S. Census Bureau
  • Wednesday
    • ADP National Employment Report, ADP
    • Institute for Supply Management’s nonmanufacturing index
    • Productivity and labor costs, U.S. Bureau of Labor Statistics
    • Trade balance, U.S. Census Bureau
  • Thursday
    • Weekly unemployment claims, U.S. Department of Labor
  • Friday
    • Jobs and unemployment, U.S. Bureau of Labor Statistics
    • Consumer credit, U.S. Federal Reserve
    • Wholesale inventories, U.S. Census Bureau


    Philosophy Quote of the Week[ii] 

    It is well to be flexible 

    “He can’t serve in the military?  Let hm seek public office.  Must he live in the private sector?  Let him be a spokesperson.  Is he condemned to silence?  Let him aid his fellow citizens by silent public witness.  Is it dangerous to enter the Forum?  Let him display himself, in private homes, at public events and gatherings, as a good associate, faithful friend, and moderate tablemate.  Has he lost the duties of a citizen?  Let him exercise those of a human being.”

     Seneca, On Tranquility of Mind, 4.3

     

    Tax Tips[iii]

    High School Students, College Students, Graduates and Taxes

    Here are 8 things a student who takes a summer job should know about taxes:

    • Don’t be surprised when your employer withholds taxes from your paycheck. That’s how you pay your taxes when you’re an employee.  If you’re self-employed, you may have to pay estimated taxes directly to the IRS on certain dates during the year.  That is how our pay-as-you-go tax system works.
    • As a new employee you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use it to figure how much federal income tax to withhold form your pay.  The IRS Withholding Calculator tool on IRS.gov can help you fill out the form.
    • Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them.  You must report $20 or more in cash tips in any one month to your employer.  You must report all your yearly tips on your tax return.
    • Money you earn doing work for others is taxable. Some work you do may count as self-employment.  This can include jobs like baby-sitting and lawn mowing.  Keep good records of expenses related to your work.  You may be able to deduct (subtract) those costs from your income on your tax return.  A deduction may help lower your taxes.
    • If you’re in ROTC, your active duty pay (the pay you get for summer camp) is taxable. A subsistence allowance you get  while in advanced training is not taxable.
    • You may not earn enough from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay.  If you’re self-employed, you may have to pay them yourself.  They count toward your coverage under the Social Security system.
    • If you’re a newspaper carrier or distributor, special rules apply. If you meet certain conditions, you’re considered self-employed.  If you don’t meet those conditions and are under age 18, you are usually exempt from Social Security and Medicare taxes.
    • You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file.  For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded.

     Tips for Graduates

    • Student Loan Interest
      • You get an above the line deduction for up to $2,500, depending on income levels.
    • Student Loan Repayments
      • You can now repay up to $10,000 in student loans and interest, from distributions of a 529 Education Plan, tax free.
    • Tuition and Fees
      • You could get a tax deduction or tax credit depending on the type of education and tax deduction you take.
    • Education Credits
      • Lifetime learning credit available up to a limit, based on income, for education that leads to a college degree or vocational diploma, no matter how old you are and no matter how many other degrees you may already have.
    • Withholding
      • Be sure when you start a new job you fill out the W-4 form to determine the correct amount of taxes, this may require help from an accountant. Don’t forget to include your state tax withholding, if applicable.
    • Retirement Savings Contribution Credit
      • People starting a new job or beginning to save with a retirement plan (even an Individual Retirement Account, or IRA) can receive a tax credit for up to $2,000 by starting a 401(k) or IRA retirement plan not contributed to in the last two years.

     

    These choices have limitations based on earned income, and whether you are claiming yourself as an exemption or not.  In many cases, in your first year out of college, your parents will claim you as a dependent.  Ensure you are talking to your parents in order to prevent double-claiming exemptions (NOT ALLOWED). 

     

    Health Tip of the Week[iv]

    Mayo Clinic researchers’ new tool links Alzheimer’s disease types to rate of cognitive decline

    Lynda De Widt

    April 30, 2024

    Mayo Clinic researchers have discovered a series of brain changes characterized by unique clinical features and immune cell behaviors using a new corticolimbic index tool for Alzheimer's disease, a leading cause of dementia. Their findings are published in JAMA Neurology. The tool categorizes Alzheimer's disease cases into three subtypes according to the location of brain changes and continues the team's prior work, demonstrating how these changes impact people differently. Uncovering the microscopic pathology of the disease can help researchers pinpoint biomarkers that may affect future treatments and patient care.

    The new "corticolimbic index" tool assigns a score to the location of toxic tau protein tangles that damage cells in brain regions associated with Alzheimer's disease. In the study, differences in where the tangles accumulated affected the disease progression.

    "Our team found striking demographic and clinical differences among sex, age at symptomatic onset and rate of cognitive decline," says Melissa E. Murray, Ph.D., a translational neuropathologist at Mayo Clinic in Florida and senior author of the study.

    The team analyzed brain tissue samples from a multi-ethnic group of nearly 1,400 patients with Alzheimer's disease, donated from 1991 to 2020. The samples are part of the Florida Autopsied Multi-Ethnic (FLAME) cohort housed at the Mayo Clinic Brain Bank. The FLAME study cohort is derived from a partnership with the state of Florida's Alzheimer's Disease Initiative. The sample population included Asian, Black/African American, Hispanic/Latino American, Native American and non-Hispanic white people who received care at memory disorder clinics in Florida and donated their brains for research.

    To verify the clinical value of the tool, researchers further investigated study participants from Mayo Clinic who underwent neuroimaging while alive. In collaboration with a Mayo Clinic team led by Prashanthi Vemuri, Ph.D., the researchers found that the corticolimbic index scores were consistent with the changes in the hippocampus detected via MRI and tau positron emission tomography (tau-PET) changes in the cortex.

    "By combining our expertise in the fields of neuropathology, biostatistics, neuroscience, neuroimaging and neurology to address Alzheimer's disease from all angles, we've made significant strides in understanding how it affects the brain," says Dr. Murray. "The corticolimbic index is a score that could encourage a paradigm shift toward understanding the individuality of this complex disease and broaden our perspective. This study marks a significant step toward personalized care, offering hope for more effective future therapies."

    The research team's next step is to translate the findings into clinical practice, giving radiologists and other medical specialists access to the corticolimbic index tool. Dr. Murray says the tool could help physicians determine the progression of Alzheimer's disease in patients and enhance clinical management. The team is also planning more research using the tool to identify areas of the brain resistant to the toxic tau protein's effects.

    For a full list of authors, funding and disclosures, see the paper.


    [i]https://www.jhinvestments.com/weekly-market-recap#investment-returns, accessed 06.02.2024.

    [ii] Holiday, Ryan.  The Daily Stoic:  366 Meditations on Wisdom, Perseverance, and the Art of Living.  Kindle edition, page 169.  Accessed 06.02.2024.

    [iii] Hockensmith, Robert F.  52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money.  Kindle edition, pages 96-98, accessed 06.02.2024.

    [iv]https://newsnetwork.mayoclinic.org/discussion/mayo-clinic-researchers-new-tool-links-alzheimers-disease-types-to-rate-of-cognitive-decline/, accessed 06.02.2024.