A strong Friday rally triggered by fresh signs of moderating inflation pushed stocks into positive territory to begin the new year. At present, the market looks to continue the rally into the new week as China's economy begins to open back up and inflation expectations continue to cool.
The Dow Jones Industrial Average rose 1.46%, while the Standard & Poor’s 500 advanced 1.45%. The Nasdaq Composite index gained 0.98%. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.90%.1,2,3
A new year did little to change the market’s overall tenor as trading remained choppy. The first two trading sessions of a holiday-shortened week saw major averages swing wildly between gains and losses as investors balanced an improving outlook on inflation against concerns of faltering economic growth. Mega-cap technology and other high-growth names endured the brunt of the selling pressure.
Stocks took a decisive turn lower Thursday on strong private payroll growth and declining jobless claims, which heightened fears that the Fed would need to push interest rates higher for longer. However, stocks staged a powerful rally on Friday despite another strong job number, partly due to a deceleration in wage growth.
The Labor Market Juggernaut
The Fed has communicated that it’s looking for weakening in the labor market before it can feel confident higher rates are working to slow inflation. Employment reports last week indicated that the Fed might need to wait a bit longer for evidence of a fading labor market.
Automated Data Processing’s (ADP) monthly employment report showed the private sector adding more jobs (235,000) than consensus estimates (153,000), with strong wage gains over the last year (+7.3%). Initial and continuing jobless claims fell in the last week of December and remained at pre-pandemic levels. Finally, the government’s monthly employment report showed employers adding a healthy 223,000 jobs in December.4,5,6
This Week: Key Economic Data
Thursday: Consumer Price Index (CPI). Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, January 6, 2023
This Week: Companies Reporting Earnings
Friday: Bank of America Corporation (BAC), JPMorgan Chase & Co. (JPM), Delta Air Lines, Inc. (DAL), UnitedHealth Group Incorporated (UNH), Citigroup, Inc. (C), Wells Fargo & Company (WFC), BlackRock, Inc. (BLK).
Source: Zacks, January 6, 2023
"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
– Winston Churchill
Is an Offer in Compromise Too Good to be True?
An Offer in Compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the total amount owed; this is a genuine service offered by the IRS. The problem arises when "OIC mills" start promising things they can't do.
These OIC mills urge people to hire their company to file an OIC application, even though the taxpayer won't qualify. They often charge significant fees and waste your time and money.
Taxpayers who qualify for an OIC can get the same deal working directly with the IRS without the extra fees. Before hiring a company to file an OIC on your behalf, check the IRS website to see if you pre-qualify for an OIC. There are also resources on the site to help you understand the process.
* 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.gov7
Create a Morning Routine That You Love
The first hour of your morning can dictate your productivity for the rest of the day, so it's worth investing in a morning routine you love. How do some of the most successful people spend the first few hours of their day? Here are a few tips:
What are some of your favorite morning rituals?
Tip adapted from Fast Company8
It is a short and simple word, and something that everyone needs. Put an 'r' on the end and you have a new friend, but if the first letter goes away, you are sad. What is this word?
Last week’s riddle: What word doesn’t belong in this group: blast, paper, castle, coin, box, storm? Answer: Coin. Why? Because you can put the word "sand" in front of all of the other words in the group.
Mt Otemanu, Bora Bora, Tahiti
Footnotes and Sources
2. The Wall Street Journal, January 6, 2023
3. The Wall Street Journal, January 6, 2023
4. CNBC, January 5, 2023
5. The Wall Street Journal, January 5, 2023
6. The Wall Street Journal, January 6, 2023
7. IRS.gov, July 7, 2022
8. Fast Company, August 22, 2012
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Weekly Market Insights: New Year's Rally in Reply to Positive Economic News
January 09, 2023