Stocks added to their early 2023 gains amid a busy stream of mixed corporate earnings results and conflicting economic data.
The Dow Jones Industrial Average gained 1.81%, while the Standard & Poor’s 500 added 2.47%. The Nasdaq Composite index rose 4.32% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, increased by 1.14%.1,2,3
With the backdrop of earnings reports and conflicting economic data, stocks climbed higher on cooling inflation, continued economic resilience, and fourth-quarter corporate earnings results that, while underwhelming, did not appear as bad as many had feared.
There was enough new economic data to support both the “recession is coming” and the “soft landing” camps. It was corporate results and continued labor market strength, along with a solid, if weakening, fourth-quarter Gross Domestic Product (GDP) growth number, however, that raised investors’ hopes that a potential recession may be mild and likely pushed out to later in the year.
The U.S. economy expanded at a 2.9% annualized rate in the fourth quarter, slightly exceeding consensus estimates of 2.8% but down from the third quarter’s 3.2% growth rate. Consumer spending, which accounts for over two-thirds of GDP, rose 2.1%. Increases in private inventory investment, government spending, and nonresidential fixed investment also contributed to the fourth quarter’s growth. Weakness in housing and a drop in exports subtracted from the quarter’s result.4
Beneath the headline number, the personal consumption expenditures price index (the Fed’s preferred measure of inflation) rose 3.2%. That was lower than the third quarter’s 4.8% increase, though it remains above the Fed’s 2% inflation target rate.5
This Week: Key Economic Data
Wednesday: Federal Open Market Committee Announcement. Job Openings and Turnover Survey (JOLTS). Institute for Supply Management (ISM) Manufacturing Index. Automated Data Processing (ADP) Employment Report.
Thursday: Factory Orders. Jobless Claims.
Friday: Employment Situation. Institute for Supply Management (ISM) Services Index.
Source: Econoday, January 27, 2023
This Week: Companies Reporting Earnings
Monday: Principal Financial Group, Inc. (PFG).
Tuesday: Advanced Micro Devices, Inc. (AMD), Pfizer, Inc. (PFE), Caterpillar, Inc. (CAT), General Motors Company (GM), McDonald’s Corporation (MCD), Amgen, Inc. (AMGN), United Parcel Service, Inc. (UPS), Stryker Corporation (SYK).
Wednesday: Thermo Fisher Scientific, Inc. (TMO), Humana, Inc. (HUM), TMobile US, Inc. (TMUS).
Thursday: Apple, Inc. (AAPL), Amazon.com, Inc. (AMZN), Ford Motor Company (F), Alphabet, Inc. (GOOGL), Qualcomm, Inc. (QCOM), Bristol Myers Squibb Company (BMY), Merck & Co., Inc. (MRK), Eli Lilly and Company (LLY), Honeywell International, Inc. (HON).
Friday: Cigna Corporation(CI), Regeneron Pharmaceuticals, Inc. (REGN).
Source: Zacks, January 27, 2023
Finding the Goldilocks Tax Withholding
Just like how Goldilocks had to try the porridge that was too hot and then the one that was too cold before she found one that was just right, you need to find the amount of tax withholding that’s not too much or too little for your circumstances. No one wants a bad surprise when Tax Day comes, and having the proper withholding can help you avoid these surprises.
You should especially check your withholding after a significant life change, such as a marriage, divorce, new child, a move, or major changes in the tax law.
How much should you withhold? The Tax Withholding Estimator on the IRS website can help people determine if they have too much income tax withheld and how to adjust.
Tip adapted from IRS.gov6
Karen is twice her brother’s age and half her father’s age. In 22 years, her brother will be half the father’s age. How old is Karen now?
Last week’s riddle: Take one letter out of a 7-letter word and it becomes longer. What is this word? Answer: Lounger.
Footnotes and Sources
2. The Wall Street Journal, January 27, 2023
3. The Wall Street Journal, January 27, 2023
4. CNBC, January 26, 2023
5. CNBC, January 26, 2023
6. IRS.gov, November 2, 2022
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