Slight gains send Dow Jones Industrial Average above 29,000!
The Dow Jones Industrial Average closed above 29,000 points for the first time and the S&P 500 index hit its second record high in three days Wednesday.
The milestones came on a day when the market traded in a narrow range as investors weighed the latest batch of corporate earnings reports and the widely anticipated signing of an initial trade deal between the U.S. and China.
President Donald Trump and China’s chief negotiator, Liu He, signed the “Phase 1″ deal before a group of corporate executives and reporters at the White House. The pact eases some sanctions on China. In return, Beijing has agreed to step up its purchases of U.S. farm products and other goods.
“This was telegraphed well enough that the market is kind of looking through it and toward the next phase and what that means,” said Keith Buchanan, portfolio manager at Globalt Investments.
Health care stocks accounted for much of the market’s gains. Utilities and makers of household goods also rose. Those gains outweighed losses in financial stocks, companies that rely on consumer spending and the energy sector.
The S&P 500 index rose 6.14 points, or 0.2%, to 3,289.29. The index also climbed to an all-time high on Monday.
The Dow gained 90.55 points, or 0.3%, to 29,030.22. The Nasdaq composite added 7.37 points, or 0.1%, to 9,258.70.
Smaller-company stocks fared better than the rest of the market. The Russell 2000 picked up 6.66 points, or 0-4%, to 1,682.40.
The benchmark S&P 500 index is on track for its second straight weekly gain.
Bond prices rose. The yield on the 10-year Treasury note fell to 1.78% from 1.81% late Tuesday.
While limited in its scope, investors have welcomed the U.S.-China deal in hopes that it will prevent further escalation in the 18-month long trade conflict that has slowed global growth, hurt American manufacturers and weighed on the Chinese economy. The world’s two largest economies will now have to deal with more contentious trade issues as they move ahead with negotiations. And punitive tariffs will remain on about $360 billion in Chinese goods as talks continue.
With the “Phase 1” agreement now a done deal, investors have more reason to focus on the rollout of corporate earnings reports over the next few weeks. Earnings have been flat to down for the last three quarters, and if the fourth quarter meets expectations, it should be around the same.
However, analysts are projecting 2020 corporate earnings growth to jump around 9.5%, which is why traders will be listening this earnings reporting season for any clues management teams give about their business prospects in coming months.
“We’re expecting a reacceleration in the back end of the year, so any (company) guidance that brings any type of skepticism to that could threaten the recent rally we’ve had and the gains that we’ve accrued in the past few months,” Buchanan said.
Health care stocks powered much of the market’s gains Wednesday. Several health insurers climbed as investors cheered a solid fourth-quarter earnings report from UnitedHealth Group.
The nation’s largest health insurer, which covers more than 49 million people, said its revenue rose 4% on a mix of insurance premiums and growth from urgent care and surgery centers. Its stock rose 2.8%. Other health insurers also moved higher. Anthem gained 1.6%, Cigna added 1.5% and Humana climbed 1.9%.
Technology companies also rose. The sector is reliant on China for sales and supply chains and benefits from better trade relations. Microsoft gained 0.7% and Advanced Micro Devices gained 0.8%.
Utilities and consumer staples sector stocks also notched gains. Edison International climbed 2.5% and PepsiCo rose 1.7%.
Financial stocks fell the most. Bank of America slid 1.8% after reporting weaker profits due to the rapid decline of interest rates in late 2019.
Energy stocks also fell along with the price of crude oil. Valero Energy dropped 3.3%.
Homebuilders marched broadly higher on news that U.S. home loan applications surged 30.2% last week from a week earlier. The pickup in mortgage applications reflects heightened demand for homes and suggests many buyers are eager to purchase a home now, rather than waiting for the traditional late-February start of the spring homebuying season. Hovnanian Enterprises jumped 6.4%.
Target slumped 6.6% after a disappointing holiday shopping season prompted the retailer to cut its forecast for a key sales measure in the fourth quarter. The company said weak sales of electronics, toys and home goods crimped sales growth to just 1.4% in November and December.
Benchmark crude oil fell 42 cents to settle at $57.81 a barrel. Brent crude oil, the international standard, dropped 49 cents to close at $64 a barrel.
Wholesale gasoline fell 1 cent to $1.64 per gallon. Heating oil declined 3 cents to $1.88 per gallon. Natural gas fell 7 cents to $2.12 per 1,000 cubic feet.
Gold rose $9.70 to $1,552.10 per ounce, silver rose 25 cents to $17.92 per ounce and copper fell 1 cent to $2.87 per pound.
The dollar fell to 109.91 Japanese yen from 110.00 yen on Tuesday. The euro strengthened to $1.1150 from $1.1128.
Markets in Europe closed mostly lower.
After Worst Trading Day Since 2008, Stocks Rocket Higher As Trump Teases Tax Cuts
In a surprise announcement late Monday evening, President Trump said he is working on an economic relief package intended to help those who have been hurt by the coronavirus outbreak.
Trump briefly mentioned a possible payroll tax cut, before saying the relief would be “substantial” and “a really big number.”
Trump said he is meeting today with Republicans in the House and Senate to discuss the possibility of suspending payroll taxes, which is paid by both employers and employees to fund Social Security.
Suspending the tax would boost the size of worker’s paychecks, something Trump has suggested before as a way to boost the economy.
Secretary of Treasury Steve Mnuchin says if the payroll tax is suspended, it will be a temporary move intended to last only a few months until the coronavirus has passed.
“The economy will be in very good shape a year from now. This is about providing proper tools of liquidity to go through the next few months.”
As part of Trump’s plan that we should learn more about this afternoon, the President also mentioned “working on loans for small businesses” and working to help the airlines, cruise lines and hotel industries as they have been hit hard by the coronavirus fears.
He added “We’re going to be working with companies, small companies, large companies, so that they don’t get penalized for something that’s not their fault. It’s not our country’s fault. This is something that we were thrown into.”
The news comes on the same day the stock market had its worst trading session since 2008 and it’s 19th worst day ever, with the Dow Jones Industrial Average plunging more than 2,000 points to close down 7.79% on coronavirus fears and plummeting oil prices.
Trump has consistently focused on the stock market as a barometer for his success as a president, so announcing this relief plan after a historically bad day for the markets doesn’t come as much of a surprise.
At the close of the market Monday, the Dow Jones Industrial Average is down 19% from the all-time high of 29,551 on February 12, less than one month ago. The bull market that started on March 9, 2009 would officially come to an end if the markets drop 20% from their all-time high.
Trump’s announcement sent futures higher, indicating the markets should open trading this morning 1,000 points higher than Monday’s close.
Even if Trump can get a relief plan passed, it’s uncertain if it will be enough to convince buyers to step back into a bull market that is on shaky ground entering its 11th year.
The coronavirus outbreak is widely expected to worsen over the coming weeks and months, and the energy market is reeling from last weekend’s fallout between Saudi Arabia and Russia.
And according to JPMorgan, historically “a market sell-off of this magnitude typically implies a 65% to 75% chance of recession in the next 12 months.”
4 Quick Ways to Get a Bigger Tax Refund
As we get closer to the April 15th filing deadline, it’s important that you take advantage of every opportunity available to lower your taxes.
Last year the IRS issued almost 122 million refunds, and here are a few tax tips you can use to make sure Uncle Sam sends you the largest refund check possible.
Increase Your Retirement Contributions
One of the fastest and easiest ways to lower your taxes is by contributing as much as you can towards your retirement accounts.
For most of us, this means adding money to an IRA (individual retirement account). The benefit is that when you contribute to your IRA, your taxable income is reduced by the same amount.
With a traditional IRA the maximum you can contribute for the 2019 tax year is $6,000. If you are over the age of 50, you can contribute an additional $1,000.
The great news is that you can contribute up to this year’s tax deadline and still claim the deduction against last year’s (2019) taxes.
If you are self-employed and contributing to a SEP-IRA (Simplified Employee Pension IRA) you can contribute 25% of your net earnings, up to a maximum of $57,000.
Start a Health Savings Account (HSA)
With an HSA, you are setting aside money to pay for future medical bills like doctor visits, prescriptions and dental care.
Like an IRA, your contributions are pre-tax, helping to lower your overall tax bill. You can contribute up to $3,500 if you are single or up to $7,000 if the coverage is for a family, and if you are over 55 you can add an extra $1,000.
An additional benefit of HSA’s is that any unused money can roll over from year-to-year, so over time you can build up a nice nest egg that can be invested. And because the contributions are pre-tax, any gains are tax-deferred.
Deduct Investment Losses
If you lost money on some of your investments, you can turn that loss into a win by using it to offset some of your capital gains.
For example, let’s say you sold a few stocks that went up in value and you now have a capital gain of $6,000. If you also took a loss of $2,000 on a few bad stock picks, you can use this loss to offset your capital gains.
Instead of paying a capital gains tax on the $6,000 profit, you can deduct the $2,000 loss from your profit to reduce your capital gain down to $4,000. So you only pay capital gains tax on the net gain of $4,000.
The maximum you can deduct each calendar year is $3,000. Any losses above that can be carried forward to the next tax year.
Itemized vs. Standard Deduction
For single filers the standard deduction for the 2019 tax year is $12,200 and for married couples filing together its $24,400.
Most taxpayers simply elect to take the standard deduction. It’s quicker and easier, but for some taxpayers, it pays to itemize.
If your deductions for mortgage interest, state and local taxes, personal property taxes, etc. are more than the standard deduction, go ahead and itemize to reduce your overall taxable income.
Nobody likes doing their taxes, but don’t be afraid to spend a few minutes looking them over to make sure you are taking advantage of as many tax breaks as you can to reduce your tax bill.
As always, if you have any questions please meet with a tax professional.
UTC Leads Dow Losers as Wall Street Rout over Coronavirus Continues
United Technologies Corp. had the worst performance Thursday among the 30 industrial components of the Dow Jones Industrial Average as investors dumped stocks on renewed worries over the spread of the coronavirus.
Shares of the aviation, aerospace and building systems manufacturer closed the day at $126.44, down more than 9%.
Boeing Co., which has been reeling following the grounding of the 737 Max after two fatal crashes, was down 8%, at $260.37.
Walgreens Boots Alliance Inc. was the only company on the index that ended the day up, closing at $48.78, advancing by 9 cents.
The Dow lost about 970 points, or 3.6%, erasing most of the gains on Wednesday.
U.S. stocks tumbled and bond yields dropped to new lows, continuing market turbulence as investors around the world remain jittery about the economic fallout from the coronavirus outbreak.
Since the outbreak of the respiratory illness in China in late January, travel and tourism have been particularly hard hit as events and other gatherings have been canceled. UTC has doubled down on aviation since 2012 when it paid $18 billion for Goodrich Corp., a manufacturer of aerospace parts and components.
In 2018, UTC paid $30 billion for Rockwell Collins Inc., an Iowa manufacturer of cockpit, cabin, navigation and airport equipment and components. Last year, it merged with defense giant Raytheon Co. and is set to rebrand itself as Raytheon Technologies Corp. and move to the Boston area in April.
UTC is spinning off its two building systems businesses — Otis Elevator and the Carrier heating and cooling manufacturing business — as it focuses on aviation and aerospace. Its big bet in aviation is paying off as it has consistently posted quarterly double-digit increases in revenue.
Aviation is now taking a hit from the virus and fears of its global spread. The International Air Transport Association on Thursday said it expects losses deepening due to the coronavirus. The industry group increased its projected 2020 global revenue losses for the passenger business to between $63 billion and $113 billion from a Feb. 20 projection of $29.3 billion in lost revenue.
The virus has since spread to more than 80 countries and “forward bookings have been severely impacted on routes beyond China,” the industry group said.
Stephen Singer can be reached at [email protected].
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