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Stock Market Today: Stocks Snap Weekly Losing Streak
Stocks headed into the long weekend on a high note with all three major indexes posting gains for the week for the first time in a long time. As a a reminder, markets will be closed this Monday, May 30, for Memorial Day.
Boosting investor sentiment today was the latest inflation update, with this morning’s report from the Commerce Department showing that the core personal consumption expenditures (PCE) price index â which excludes energy and food prices â rose 4.9% annually in April. While this pace is still elevated, it’s down from the 5.2% year-over-year rise seen in March.Â
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Separate data showed consumer spending was up 0.9% sequentially last month. However, the personal savings â or, savings as a percentage of disposable income â rate fell to 4.4% from March’s 5.0%.
The drop in the savings rate indicates “U.S. consumers are now starting to chip away at those much-ballyhooed excess savings [accumulated during the pandemic], to help pay for the spurt in food and energy costs,” says Douglas Porter, chief economist at BMO Capital Markets.Â
But even with that money already spent, there’s still an estimated $2.3 trillion, or more than 9% of gross domestic product, in savings, he adds. “True, they are not well distributed across income cohorts â hence the wildly differing experiences by varying retailers. But, even if just a third of these pandemic savings are spent, this will readily support overall outlays through 2023,” Porter says.
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A round of well-received earnings reports from several tech firms like software maker Autodesk (ADSK, +10.3%), IT solutions firm Dell Technologies (DELL, +12.9%) and integrated circuit specialist Marvell Technology (MRVL, +6.7%) also buoyed the broader markets.
At the close, the Dow Jones Industrial Average was up 1.8% at 33,213, the S&P 500 Index was 2.5% higher at 4,158 and the Nasdaq Composite had gained 3.3% to 12,131.Â
For the week, the Dow rose 6.2% to snap its eight-week losing streak, while the S&P 500 (+6.6%) and Nasdaq (+6.8%) held their consecutive weekly declines to seven.
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Other news in the stock market today:
- The small-cap Russell 2000Â rose 2.7% to 1,887.
- Gold futures edged up 0.2% to settle at $1,851.30 an ounce.
- Bitcoin did not participate in today’s broad-market rally, sinking 2.0% to $28,779.96. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)Â
- Ulta Beauty (ULTA) jumped 12.5% after the cosmetics retailer said revenue jumped 21% year-over-year in its first quarter to $2.3 billion, while earnings soared 53.4% to $6.10 per share, both figures more than analysts were expecting. “We believe [ULTA’s earnings] clearly demonstrates that beauty spending is recovering strongly as households feel more comfortable in re-engaging in pre-pandemic routines,” says UBS Global Research analyst Michael Lasser (Buy). “Plus, ULTA is executing nicely and gaining share in the process.”
- Red Robin Gourmet Burgers (RRGB) surged 25.1% after the burger chain reported a slimmer-than-expected loss and higher-than-anticipated revenue for its first quarter. RRGB also said same-store sales were up an impressive 19.7% over the three-month period. “We see multiple tailwinds at off-premium and structural efficiencies from [Red Robin’s] menu/labor model that give us confidence in continued momentum through 2022 and 2023,” says Jefferies analyst Alexander Slagle (Buy). “We believe risk/ reward for RRGB at current valuation is among the most attractive at trough multiples relative to category peers, and see tangible drivers of same-store sales upside beyond the near term that have yet to be fully reflected at current levels.”
Is it Too Late to Buy Energy Stocks?
Worried you’ve missed the runup in energy stocks? Several macro catalysts such as sizzling inflation, short-term supply and demand dynamics and the Ukraine war have boosted oil prices in 2022. U.S. crude futures tacked on 0.9% on Friday to settle at $115.07 per barrel, bringing their weekly gain to 4.3%. This helped fuel a more than 8% weekly gain for the energy sector, bringing its year-to-date return to 59.4%.Â
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“With commodity prices up and inflation creating waves, is it too late for investors to capitalize on high commodity prices?” asks Lucas White, portfolio manager at asset management firm GMO.
No, the strategist says â for a number of reasons, including the fact that energy sector components are still considered value stocks. “Though commodities are up, resource companies trade at more than a 60% discount relative to the S&P 500, a level that has almost never been seen,” White explains, adding that the recent spike in commodity prices has yet to flow through to companies’ fundamentals â meaning investors can still expect strong returns going forward.Â
For those looking to capitalize on the red-hot sector, there are plenty of energy stocks to choose from, including high-yielding master limited partnerships (MLPs). But for those looking for more diversified exposure to high oil prices, may we suggest this list of energy exchange-traded funds (ETFs). The funds featured here sport a variety of strategies that should help investors leverage any additional gains in oil and natural gas.
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What Does It Mean to Be House Poor?
If youâre an existing homeowner or an aspiring one, you may have heard the phrase âhouse poor,â typically uttered by an overextended borrower. It may also serve as a warning to a first-time home buyer from a seasoned homeowner, especially right now with home prices so high. The Definition of House Poor Buying too much… Read More »What Does It Mean to Be House Poor?
The post What Does It Mean to Be House Poor? appeared first on The Truth About Mortgage.
Donât Move to Another State Just to Reduce Your Taxes
We know lots of friends who are considering moving from a high-tax state, such as New York, to a state with low or no state income taxes. They think they will end up with more money, although they are torn because they may also be moving away from family and friends just to escape state taxes.
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What I advise them to do is think about spendable income â the amount theyâll have to spend after taxes â and not just low or zero tax rates. If you have more money to spend after paying the tax bill wherever you currently live, you might as well stay where you are, if itâs closer to the grandkids. You may be able to pay for at least one warm-weather winter trip, too.
Design a Smarter Retirement Income Plan
Before making life decisions about moving (or downsizing, purchasing insurance, etc.) retirees ought to know their number for their total starting income, and have a plan for retirement income that includes a projection of income and savings, and all planning assumptions.
The income plan ought to cover:
- Starting income
- Inflation protection
- Beneficiary income protection
- Spousal income (if applicable)
- Plan management (when plan assumptions are not realized)
- Market risk to plan (when markets fluctuate)
- Legacy passed on to beneficiaries or heirs
All these subjects are covered in articles on Kiplinger.com. In one article, How to Generate an Extra $20,000 a Year in Retirement, we examined the income from our favorite investor (a 70-year-old woman with $2 million of savings, of which 50% is in a rollover IRA). We saw a large before-tax income advantage from Income Allocation planning. Even if she invests a portion of that to meet her legacy objective, she still has a $20,000 advantage in spendable annual income.
The question is whether she gives back that advantage in federal and state income taxes in her home state of New York.
Reducing your Combined Federal/State Retirement Tax %
You may have heard that New York is a high-tax state, and thatâs true. It ranks No. 5 on Kiplingerâs list of the 10 least tax-friendly states for middle-class families.Â
Importantly, most states exclude Social Security income from taxation, as well as a portion of IRA distributions and employer pension plans. Together with interest on state and local bonds that is not taxed, a retiree has a head start in reducing state income taxes.Â
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But the question remains how much of that advantage is eaten up in New York state income taxes. The key for our Go2Income planning is that annuity payments are treated the same in both the New York and federal tax returns, meaning the tax benefits carry over. And with some of the adjustments at the state level mentioned above, the favorable tax treatment of annuity payments may be even more valuable.
Let me share with you the high-level elements of our 70-year-old investorâs federal and New York state tax filing.
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Courtesy of Jerry Golden
Benefits and Cost from this Planning
For our investor the income taxed by New York would be around $67,500 â or about 40% of her total gross income. As a percentage of total income, the state income tax is a little more than 2%. Even after adding federal taxes, her Retirement Tax Rate is less than 15%. That leaves her a big advantage in spendable income. A traditional plan without annuity payments and with lower income actually pays more in total taxes â with a combined tax rate of over 18%.
So, our plan produces more cash flow from savings, much of it tax-favored, and gives our retiree the freedom to live where she prefers.
And the cost? The primary one is that annuity payments donât continue at your passing even before the premium has been recovered.Â
You can elect a beneficiary protection feature that makes sure total annuity payments will equal the premium at a minimum. However, that choice will reduce the level of guaranteed annuity payments and some of the tax benefits. Or you can use the higher annuity payments to purchase some life insurance. And those planning choices arenât the only options you will have in terms of beneficiary protection.Â
What if the lure of zero state income taxes is too great? Our retiree could move to Florida, save the $3,500 in New York taxes, adopt a Go2Income plan for her circumstances â and pay for the kidsâ trips to visit her.
So be with the kids, live where you want and possibly leave less at your passing if itâs early in retirement. Bottom line: Donât follow the crowd. Do your own research. And rely on resources at Kiplinger.
At Go2Income, we can provide you with a complimentary personalized plan that delivers both a high starting income and growing lifetime income, as well as long-term savings.Â
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