Higher bond yields and a legislative stalemate in Washington, D.C., added up to losses for the week.
The Dow Jones Industrial Average declined 1.36%, while the Standard & Poor’s 500 lost 2.21%. The Nasdaq Composite index fell 3.20%. The MSCI EAFE index, which tracks developed overseas stock markets, shed 2.58%.1,2,3
An Ugly Week
The reality of a more hawkish Fed finally hit the bond market, sparking a sell-off in bonds that sent yields higher. Higher yields hurt technology and other high-growth companies, and that weakness spread to the broader market. (Higher yields can reduce the value of a company's future cash flow, which may reset valuations.)
Congress added to the market uncertainty. It was unable to advance an infrastructure bill, and it made little progress on the debt-ceiling agreement. After a sell-off to close out September, stocks surged on Friday on news of a potential Covid-19 oral therapeutic, an easing of yields, and reports that President Biden was traveling to Capitol Hill to help break the logjam on legislation.
Powell in the News
Fed Chair Jerome Powell was at the center of two news developments last week. The first was the announcement by a prominent senator opposing Powell’s renomination, heightening market uncertainty over the leadership transition when his term expires in February 2022.4
Powell later made comments at a European Central Bank event, admitting that the current bout of inflation may last longer than he and many other central bankers have previously expected. But he remained steadfast that inflation would be transitory, attributing much of today's price pressures to temporary supply bottlenecks. Powell also said that he saw little evidence of building inflationary expectations from consumers or businesses.5
This Week: Key Economic Data
Tuesday: ISM (Institute for Supply Management) Services Index.
Wednesday: ADP (Automated Data Processing) Employment Report.
Thursday: Jobless Claims.
Friday: Employment Situation.
Source: Econoday, October 1, 2021
This Week: Companies Reporting Earnings
Tuesday: PepsiCo, Inc. (PEP).
Wednesday: Constellation Brands (STZ).
Thursday: Conagra Brands (CAG).
Source: Zacks, October 1, 2021
Who Qualifies for the Child and Dependent Care Tax Credit?
Let's outline who the IRS defines as a qualifying person under this care credit:
In addition to spouses and dependents, the credit may also cover someone who is mentally or physically unable to take care of themselves and lived with the taxpayer for six months. This is the case if that person was the taxpayer's dependent, or if they would have been the taxpayer's dependent except for one of the following:
* 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.gov6
How is seven different from the rest of the numbers between one and ten?
Last week’s riddle: What can you hold in your right hand, but never in your left hand? Answer: Your left hand.
Footnotes and Sources
2. The Wall Street Journal, October 1, 2021
3. The Wall Street Journal, October 1, 2021
4. CNBC.com, September 28, 2021
5. APNews.com, September 29, 2021
6. IRS.gov, June 10, 2020
7. Formstack.com, January 23, 2020
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