Investment Commentary – March 12, 2019

Year to Date Market Indices as of Market Close March 12, 2019
Dow 25,554 (9.55%)
S&P 2,791 (11.36%)
NASDAQ 7,591 (14.40%)
Gold $1,301 (0.83%)
OIL $57.09 (22.77)
Barclay Bond Aggregate (1.44%)
Fed Funds Rate 2.50% (last increase was 12/19/18)

Stocks close mostly higher on health care, utilities rise; Boeing weighs on the Dow

U.S. stocks closed mostly higher Tuesday, led by the health care and utilities sectors, while the Dow Jones Industrial Average retreated as shares of Boeing Co. came under heavy pressure following a fatal crash over the weekend of a 737 Max aircraft.

How did major indexes fare?

The Dow DJIA, -0.38% lost 96.22 points, or 0.4%, to end at 25,554.66. The S&P 500 SPX, +0.30% rose 8.22 points, or 0.3%, to finish at 2,791.52 as health care and utilities stocks led gains, while the Nasdaq Composite Index COMP, +0.44% rose 32.97 points, or 0.4%, to finish at 7,591.03.

What drove the market?

The price-weighted Dow fell as its largest component, Boeing BA, +0.26% sank another 6.2% after losing 5.3% Monday.

Although, the Federal Aviation Administration declared the 737 Max 8 airworthy, more regulators have decided to ground the planes, including those in Australia, Singapore and the Middle East.

The decisions come amid worries about flight systems in Boeing’s 737 Max models following the weekend crash, which resulted in the death of 157 people near Ethiopia’s capital, Addis Ababa.

The stock market shrugged off the U.K. Parliament’s rejection of Prime Minister Theresa May’s Brexit deal, in part, as the outcome had been anticipated. Lawmakers will now have to decide whether they want a Brexit without a deal or possibly extend the March 29 deadline for leaving the European Union.

Separately, reports indicated progress on a Sino-American trade deal, with China and the U.S. reportedly close to a deal on currencies—an element in their broader trade dispute.

Around the web:

Trade deficit expands: The U.S. trade deficit has grown to the largest level since 2008. Last year’s 12% growth rate for the nation’s trade deficit was fueled in part by record trade gaps with China and Mexico.

Buyback record: U.S. stock buybacks have broken a record for the fourth quarter in a row. Companies in the S&P 500 reported nearly $215 billion in share repurchases in last year’s fourth quarter, topping the prior record of $204 billion set in the third quarter of 2018, according to S&P Dow Jones Indices.

Jobs disappointment: U.S. jobs growth dropped to the slowest monthly pace in about a year and a half. The economy generated just 20,000 jobs in February, far short of most economists’ expectations and January’s 311,000 figure. However, the unemployment rate slipped to 3.8% and wage growth accelerated.

Lord Abbett Tax Info: Did You Underpay Your Taxes in 2018?

The IRS offers some relief to those who didn’t withhold enough in the 2018 tax year.

In Brief:

With the passage of tax reform in December 2017, new withholding tables were not available to employers until mid-January 2018, and some employees didn’t see a switch in withholding until mid-February 2018.

As a consequence, some taxpayers underpaid their taxes in 2018, so the IRS has waived the normal penalty for underpayment.

The IRS urges everyone to check their withholding for 2019. This is especially important for those taxpayers who faced an unexpected tax bill for 2018.

Some taxpayers are getting an unpleasant surprise as they file their tax returns for 2018. They’re finding out that they didn’t withhold enough or make sufficient estimated quarterly payments during the year, and now they have to write out a check to the IRS.

The good news is that the IRS has decided to waive the normal penalty for underpayment in 2018. You may still have to pay a penalty, but the threshold has been reduced from 90% to 85%. That is, if you still managed to pay, through withholding and estimated payments, at least 85% of the 2018 tax due, you will not have to pay a penalty for underpayment.

Taxpayers are normally subject to a penalty if their estimated tax payments and withholding are less than 90% of the current-year liability or 100% of the prior year’s tax (110% for high-income earners).

Other Notable Indices (YTD)
Russell 2000 (small caps) 15.11
EAFE International 8.07
Emerging Markets 7.80
Shiller Annuity Index 5.03

The views presented are not intended to be relied on as a forecast, research or investment advice, are the opinions of the sources cited, and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.