By: Sean Schmid, Chief Operating Officer – Penn Investment Advisors
Weekly Update – October 18, 2021
A strong opening to the third-quarter earnings season sparked a late week, broad-based rally that helped stocks finish the week with solid gains.
The Dow Jones Industrial Average rose 1.58%, while the Standard & Poor’s 500 added 1.82%. The Nasdaq Composite index led, gaining 2.18% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 1.37%.1,2,3
Investor Optimism Returns
After beginning the week on a lackluster note, stocks turned higher on Wednesday as companies kicked off a new earnings season and details about the Fed’s taper plans emerged. Investor enthusiasm shifted into high gear the following day on positive economic data and earnings reports that exceeded investor expectations. Buying continued through Friday on fresh earnings surprises and a better-than-expected retail sales report.
The economic data allayed some concerns about inflationary pressures and economic deceleration, while early earnings results provided hope that companies had weathered the surge in summer Covid infections. Nevertheless, worries about how supply-chain disruption and higher prices may impact corporate earnings guidance haven’t gone away.
Let the Tapering Begin
Minutes from September’s Federal Open Market Committee released last week provided detail around the Fed’s plans to taper its $120 billion monthly bond purchase program. The Fed expects to reduce its purchases by $15 billion each month, beginning in mid-November/December and ending in June 2022.4
This tapering schedule is somewhat faster than what investors were anticipating, reflecting the Fed’s concern that inflation has been somewhat higher and more persistent than it had anticipated, with continuing supply-chain bottlenecks raising that risk level. Fed Chair Powell’s commitment to transparency and advanced signaling of policy changes appeared to have worked, as markets greeted the news calmly. In fact, stocks rallied strongly the following day as yields moved lower.
This Week: Key Economic Data
Monday: Industrial Production.
Tuesday: Housing Starts.
Thursday: Jobless Claims. Existing Home Sales. Index of Leading Economic Indicators.
Friday: PMI (Purchasing Managers’ Index) Composite Flash.
Source: Econoday, October 15, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Tuesday: Netflix, Inc. (NFLX), Johnson & Johnson (JNJ), Procter & Gamble (PG), Kansas City Southern (KSU).
Wednesday: Tesla, Inc. (TSLA), International Business Machines (IBM), Verizon Communications (VZ), Abbott Laboratories (ABT), United Airlines (UAL), CSX Corporation (CSX).
Thursday: AT&T, Inc. (T), Intel Corporation (INTC), Snap, Inc. (SNAP), PPG Industries, Inc. (PPG), Southwest Airlines (LUV), American Airlines Group, Inc. (AAL), Union Pacific Corporation (UNP), Chipotle Mexican Grill, Inc. (CMG), Danaher Corporation (DHR), Dow, Inc. (DOW).
Friday: American Express Company (AXP), HCA Healthcare, Inc. (HCA), Schlumberger Limited (SLB).
Source: Zacks, October 15, 2021
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Quote of the Week
“It is not the years in your life but the life in your years that counts.”
– Adlai Stevenson
Tax Tips
How to Research Tax-Exempt Organizations
The IRS makes it easy to check various organizations’ status to ensure that they are eligible to receive tax-deductible contributions. It provides a tool, Tax Exempt Organization Search, which allows users to research an organization quickly and easily, using information such as the organization’s name, Employee Identification Number, and location.
In addition to finding out whether an organization is eligible to receive tax-deductible donations, users also automatically can see whether any organizations’ tax-exempt status has been revoked (which happens if they don’t file their required Form 990-series for three years in a row), as well as access IRS determination letters that recognize the organization as tax-exempt, among other information.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov5
Have investment questions? Call us at1.800.626.1027 or email us at invest@pennadvisors.com.
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Footnotes, disclosures and sources:
Investment advisory services are provided through Penn Investment Advisors, Inc. (PIA), a Registered Investment Adviser. PIA is a wholly-owned subsidiary of Penn Community Bank (Bank). Investment products, securities and services offered by PIA are not a deposit of, or obligation of, or guaranteed by the Bank, or an affiliate of the Bank, are not insured by the FDIC or any agency of the United States, the Bank, or any affiliate of the bank and involve investment risk, including the possibility of loss of principal. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
These are the views of Penn Investment Advisors, Inc., and other listed sources. This should not be construed as investment advice. Penn Investment Advisors, Inc., does not give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information. By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
- The Wall Street Journal, October 15, 2021
- The Wall Street Journal, October 15, 2021
- The Wall Street Journal, October 15, 2021
- The Wall Street Journal, October 13, 2021
5. IRS.gov, February 26, 2021