The stock market edged lower last week as it digested a crosscurrent of conflicting economic data and contrasting comments from Fed officials.
The Standard & Poor’s 500 declined by 0.69%, while the Dow Jones Industrial Average was flat (-0.01%). The Nasdaq Composite index lost 1.57% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 0.88%.1,2,3
Stocks took a spill after Fed officials' comments cast uncertainty about future rate hikes. The more hawkish comments soured investor hopes of an imminent easing in Fed rate hikes, a prospect that had helped fuel the market rally the previous week.
Concerns over the hawkish comments raised investor worries over recession risks, anxiety exacerbated by weak housing data and layoff announcements from major technology companies. The economic picture, however, included some encouraging news as retail sales rose and producer price increases moderated.
Producer Prices Ease
The Producer Price Index (PPI), which reflects the costs paid by domestic producers, seen as an indicator of future consumer prices, is not typically a market-moving event. That was not the case last week.
October's PPI rose a modest 0.2%, well below the 0.4% consensus estimate. The year-over-year increase moderated to 8.0%, compared to 8.4% in September and the peak of 11.7% in March. The eye-catching element may have been the 0.1% service decline, representing the first decline since November 2020. Excluding food and energy, the PPI was flat for the month and up 6.7% from a year ago.4
All the above data supports my thinking from last week's letter. I suspect that when these numbers flow through to the consumer side in a month or 2 inflation will be below 3% (if you take the monthly change and compound that for a year.) Of course the usual caveats about the war in Ukraine and China yanking our supply chain apply - either one (or something new) could disrupt the emerging pattern.
A Final Word
We wish you and your family a wonderful Thanksgiving and express our gratitude for the privilege of working with you. Happy Thanksgiving!
This Week: Key Economic Data
Wednesday: Durable Goods Orders. Jobless Claims. Purchasing Managers’ Index (PMI) Composite. New Home Sales. Consumer Sentiment. FOMC Minutes.
Source: Econoday, November 18, 2022
This Week: Companies Reporting Earnings
Monday: Dell Technologies, Inc. (DELL), Zoom Video Communications, Inc. (ZM).
Tuesday: Best Buy Co., Inc. (BBY), Dollar Tree, Inc. (DLTR), Autodesk, Inc. (ADSK), Analog Devices, Inc. (ADI).
Wednesday: Deere & Company (DE).
Source: Zacks, November 18, 2022
"A successful person is one who can lay a firm foundation with the bricks that others throw at him or her."
– David Brinkley
What to Know About Nonemployee Compensation
If you hire an independent contractor for your business, you are generally not responsible for withholding income taxes, Social Security, or Medicare taxes from their compensation. However, by law, business taxpayers who pay nonemployee compensation of $600 or more must report these payments to the IRS.
You can report these payments using Form 1099-NEC, Nonemployee Compensation. Generally, Form 1099-NEC is due by January 31. The compensation you report is subject to backup withholding if your business has not provided a Taxpayer Identification Number to the payer or the TIN doesn’t match. It’s important to be aware of this rule regarding nonemployee compensation because employees and contractors are taxed differently, but you need to note if your payments exceed the $600 limit.
* 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
How to Use Coffee Grounds in Your Garden
Not only does coffee give us the caffeine we need to power through the day, but it can also give your garden the boost it needs to grow and thrive! Coffee grounds can improve your soil, deter pests, and give your plants the necessary nutrients.
To add coffee grounds to your garden, you can add them to your existing compost material or directly to the soil itself. Coffee grounds are “green” composting materials that are rich in nitrogen. Because of this, ensure you balance your compost with brown materials such as newspaper, cardboard, or dead plant material.
If you add the grounds directly to the soil, sprinkle them evenly rather than dump them in piles so they can expel nitrogen into the soil.
Tip adapted from The Spruce6
It has no crown, yet when the chips are down it is more powerful than a king or queen. What is it?
Last week’s riddle: I’m usually standing on a city sidewalk, and I’ll always stand by your car. But if you don’t feed me, you may get into trouble. What am I? Answer: A parking meter.
Hot air balloons at sunrise, Cappadocia, Goreme, Turkey
Footnotes and Sources
2. The Wall Street Journal, November 18, 2022
3. The Wall Street Journal, November 18, 2022
4. CNBC, November 15, 2022
5. IRS.gov, August 8, 2022
6. The Spruce, February 22, 2022
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The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
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Weekly Market Insights: Markets Down Ahead of Thanksgiving Holiday
November 21, 2022