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After a Superb January, the Dow Fell More Than 1,000 Points Last Week

WAGE GROWTH PICKS UP AT LAST

In January, average hourly pay was 2.9% higher than it was a year earlier. That was the key takeaway from the Department of Labor’s latest jobs report, which noted the addition of 200,000 net new workers last month. In January, the headline unemployment rate stayed at 4.1%; the broader U-6 rate, which counts the underemployed, ticked up to 8.2%.1

ISM: FACTORY SECTOR IN GREAT SHAPE

The Institute for Supply Management released its January purchasing manager index for the manufacturing industry last week, and the reading of 59.1 surpassed the forecast, made by economists surveyed by MarketWatch, by half a point. A reading approaching 60 indicates significant expansion.2

HOUSEHOLDS SPEND MORE, REMAIN OPTIMISTIC

Personal spending and incomes rose 0.4% in December, according to a Department of Commerce report. The Conference Board’s consumer confidence index climbed 2.3 points to 125.4 in January, while the University of Michigan’s final January consumer sentiment index came in at 95.7 Friday, 1.3 points above its prior reading.2

STOCKS SLUMP AS FEBRUARY BEGINS

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Stock Indices Continue Their March Higher

THE ECONOMY EXPANDED 2.6% in Q4

The Department of Commerce’s first estimate of fourth-quarter gross domestic product was 0.6% below the Q3 number, but still well above the 2.1% rate the nation has averaged in the recovery from the Great Recession. America saw 2.3% economic growth in 2017, according to the report.1

  

HOME SALES RETREATED DURING THE HOLIDAYS

Winter chill possibly encouraged the decline as much as high prices and low inventory. The National Association of Realtors noted a 3.6% slump in resales in December, while the Census Bureau said that new home purchases fell 9.3% last month. Existing home sales improved 1.1% during 2017; new home sales, 8.3%.2

  

OIL REBOUNDS, REACHES $66

WTI crude advanced 4.5% in five trading days, settling at $66.14 Friday on the NYMEX. That was its highest close in more than three years. Crude prices have risen for five of the past six weeks.3

   

KEY STOCK INDICES CLIMB

Wall Street’s big three performed well last week,

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Dow Reaches Another Milestone

CONSUMER SENTIMENT READING COOLS

The initial January University of Michigan consumer sentiment index came in at 94.4 last week, 1.5 points beneath its final reading of 2017 and 4.1 points under its level of one year ago. Without prompting, 34% of respondents to the latest UMich survey brought up the subject of the recent federal tax reforms; 70% of them felt the reforms would have a positive effect on their lives; 18%, a negative effect.1

WINTER WEAKENS HOUSING STARTS

New Census Bureau data shows groundbreaking decreased 8.2% in December after a (revised) 3.0% November gain. Building permits ticked down 0.1% last month.2

BITCOIN PLUMMETS & RECOVERS; OIL DESCENDS

Commodity investors watched the premier digital currency crest above $14,000 Monday, sink under $10,000 Wednesday, and rebound to a price of $11,400.35 as Wall Street’s trading week ended. Friday, the International Energy Agency predicted U.S. oil output would near a 50-year peak in 2018. That hurt prices and left WTI crude 1.5% lower for the week; it fell to $63.37 at Friday’s closing bell.3,4

DOW REACHES ITS SECOND MILESTONE IN A MONTH

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Strong start to the year for Stocks!

LOW UNEMPLOYMENT, BUT LESS HIRING

The Department of Labor’s latest jobs report announced a headline unemployment rate of only 4.1% in December, but it also showed companies adding just 148,000 net new workers last month. Even so, net payroll growth averaged 204,000 during the last three months. In hiring terms, the health care sector grew more than any other industry in 2017, expanding by 300,000 jobs. Wages rose 2.5% last year. The broader U-6 jobless rate, encompassing the underemployed, ticked up a tenth of a point to 8.1%, which was still half a percent below its level of a year ago.1

  

MORE FACTORY ACTIVITY DURING THE HOLIDAYS

December saw U.S. manufacturers pick up their pace. The Institute for Supply Management’s purchasing manager index for the factory sector surprised to the upside with a fine reading of 59.7. Economists polled by Briefing.com had projected the PMI to decline 0.2 points to 58.0. ISM’s non-manufacturing PMI fell in December, weakening 1.5 points to a reading of 55.9.2

  

WTI CRUDE CONTINUES TO RALLY

Finishing at $61.41 on the NYMEX Friday, it advanced 1.7% last week. Investor concern over anti-government protests in Iran and stateside data showing smaller crude reserves helped. Oil settled at $62.01 Thursday, which was a peak unmatched in roughly three years.3

  

A SHORT, NOTEWORTHY WEEK STARTS THE YEAR

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Legislative Update

Tracking legislation that may impact your business, your estate, your retirement, or your wallet.

Recent Developments

 The I.R.S. gave relief to taxpayers affected by natural disasters.Fall 2017 income tax extension and estimated tax payment deadlines were rescheduled to January 31, 2018 for California wildfire victims (individuals and businesses in Butte, Lake, Mendocino, Napa, Nevada, Sonoma, and Yuba Counties). The same relief was extended to individuals and businesses victimized by flooding and hurricanes in Florida, Georgia, parts of Texas, Puerto Rico, and the Virgin Islands; in addition, hardship withdrawals from 401(k)s and similar employee retirement plans are freely allowed for taxpayers in these four states and two territories through January 31.1,2 

The employer mandate of the Affordable Care Act is now being enforced. In October, the I.R.S. began mailing letters to businesses who had not offered their workers qualifying health coverage under the ACA, notifying these firms of oncoming tax penalties. The targeted non-compliant employers are those with 100 or more FTEs who failed to observe this requirement in 2015. In previous years, the I.R.S. lacked the time and resources to enforce the employer mandate, though businesses with 50 or more workers are required to abide by it.3

The Tax Cuts & Jobs Act

 Federal tax laws will change significantly in 2018. The just-passed Tax Cuts & Jobs Act greatly alters key regulations within the Internal Revenue Code. Here is a summary of the major modifications, most scheduled to sunset in 2025 unless renewed:

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