By: Sean Schmid, Chief Operating Officer – Penn Investment Advisors
Weekly Update – July 20, 2020
The Week on Wall Street
Stocks were mixed last week as investors reacted to positive economic data, progress on a COVID-19 vaccine, and the continued nationwide increase in COVID-19 cases.
The Dow Jones Industrial Average gained 2.29%, while the Standard & Poor’s 500 rose by 1.25%. But the Nasdaq Composite Index dropped 1.08% for the week. The mega-cap technology companies saw some profit-taking last week, sending the Nasdaq Composite to its first loss in three weeks. The MSCI EAFE Index, which tracks developed stock markets overseas, ended 2.19% higher.[1],[2],[3]
Stocks Find a Way Higher
After a Monday rally melted away on news that California was rolling back its reopening plans amid rising infections, a new earnings season began on a hopeful note. Stocks posted back-to-back daily gains on the strength of positive earnings surprises from a few money center banks and encouraging news about progress in the development of a COVID-19 vaccine.[4]
Despite a strong retail sales number, new jobless claims and rising U.S.-China tensions reminded investors that global economic recovery remains fragile, leading stocks to pare some of the week’s earlier gains.[5],[6]
Earnings Season Begins
While investors long ago accepted the idea that this earnings season would be ugly, reflecting the impact of the economic shock due to COVID-19, it didn’t mean that there weren’t important insights to be gained from this quarter’s earnings reports.
Three money center banks last week kicked off the earnings season, reporting substantial declines in profits and an additional cumulative $28 billion set aside for loan-loss reserves.[7]
Banks are an important economic bellwether since they touch every part of the U.S. economy. Although their earnings were significantly lower, they actually beat consensus Wall Street estimates, which encouraged investors and set the stage for stocks to move higher. The story on this quarter’s earnings season, however, is far from finished as investors await the stream of companies releasing their quarterly results in the days and weeks ahead.
THE WEEK AHEAD –
KEY ECONOMIC DATA:
Wednesday: Existing Home Sales.
Thursday: Index of Leading Economic Indicators. Jobless Claims.
Friday: New Home Sales.
Source: Econoday / Federal Reserve, July 17, 2020. 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. The release of data may be delayed without notice for a variety of reasons, including the shutdown of the government agency or change at the private institution that handles the material
THE WEEK AHEAD – COMPANIES REPORTING EARNINGS:
Tuesday: Lockheed Martin (LMT), Snap (SNAP), Coca Cola (KO), Texas Instruments (TXN), Capital One Financial (COF).
Wednesday: Microsoft (MSFT), Tesla (TSLA), United Airlines (UAL).
Thursday: AT&T (T), Intel (INTC), Union Pacific (UNP).
Friday: Verizon (VZ), American Express (AXP).
Source: Zacks, July 17, 2020, Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. 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.
Tax Tips
501(c)(3) Organizations vs. 501(c)(4) Organizations: What’s the Difference?
Whether you’re donating to a local animal shelter, a soup kitchen, or an arts program, it feels great to give back. There are many different types of organizations to support. Let’s look at two of the most common:
- 501(c)(3) organizations are nonprofit organizations that are dedicated to religious, charitable, or educational purposes. Donations to 501(c)(3) organizations may be tax deductible. These organizations may not attempt to influence legislation or participate in any campaign activity for or against political candidates.
- 501(c)(4) organizations are social welfare groups that can engage in more lobbying and advocacy. Contributions to 501(c)(4) organizations may not be tax deductible.
It’s important to know what kind of organization you are donating to if you want to know if your contributions can be tax deductible.
* 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.gov[8]
Have investment questions? Call us at 1.800.626.1027 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.
[1] The Wall Street Journal, July 17, 2020
[2] The Wall Street Journal, July 17, 2020
[3] The Wall Street Journal, July 17, 2020
[4] CNBC.com, July 14, 2020
[5] WSJ.com, July 16, 2020
[6] CNBC.com, July 16, 2020
[7] The New York Times, July 15, 2020
[8] IRS.gov, May 27, 2020