Dow closes lower Wednesday to end 5-day win streak, Wall Street mulls new retail data | Big Indy News
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Dow closes lower Wednesday to end 5-day win streak, Wall Street mulls new retail data



Dow slumps more than 170 points, stocks close lower

Stocks closed lower Wednesday, with the Dow Jones Industrial Average snapping its 5-day win streak.

The Dow slid 171.69 points, or 0.5%, to close at 33,980.32. The S&P 500 slipped 0.72% to 4,274.04, and the Nasdaq Composite shed 1.25% to 12,938.12.

Despite the move, the Dow ended the session positive for the week. The S&P 500 and Nasdaq sit in negative territory.

— Samantha Subin

Meme stock rally could signal broader market about to peak

Big moves in meme stocks can be a warning that the broader market is near a top.

The meme stock du jour has been Bed Bath & Beyond, up more than 29% Wednesday after a number of big moves this month.

“Typically when you get to the tail end of a rally, they go after the highly speculative meme type names,” said Scott Redler, chief strategic officer at T3Live. “That usually gives us clues a peak is coming and that could have been yesterday.”

Redler was referring to the fact that the S&P 500 brushed against its 200-day moving average but did not break through that level and close there. That would have been considered bullish.

The 200-day was 4,324 on the S&P Wednesday. The S&P was at 4,275 in late trading.

“The meme frenzy is usually indicative of speculation and froth and the end of an active sequence. Up to the 200-day is a likely spot for the market to rest for the rest of the summer,” Redler said.

— Patti Domm

Walmart’s results bode well for dollar stores, Loop Capital says

Walmart’s strong quarterly results could bode well for dollar stores that cater to a similar target market, Loop Capital says.

“We believe WMT’s performance is a positive read through for Dollar General and Dollar Tree given the similar target customer bases, while the dollar stores are not weighed down by the inventory glut Walmart is,” analyst Anthony Chukumba said in a note to clients Wednesday.

Chukumba believes that companies like Dollar Tree and Dollar General remain in a “sweet spot” as higher-income customers trade down from more expensive alternatives. At the same time, these names should benefit from spending power increasing for lower-income consumers with the decline in gas prices.

— Samantha Subin

Stocks off lows as market views Fed minutes as more moderate than expected

Stocks came well off their lows after the Federal Reserve’s July meeting minutes were less hawkish than feared.

But strategists said the minutes were not as dovish as the market initially perceived them to be. The Dow had been down more than 300 points earlier Wednesday and briefly turned positive after the 2 p.m. ET minutes. The index was down about 75 points in late trading.

“Reading the minutes if you’re on team pivot, there was enough in there to keep you satisfied,” said Art Hogan, chief market strategist at National Securities. “But if you’re on the team that believes the Fed has has along way to go, you’re equally pleased. I think it boils down to we’re data dependent.”

Keith Lerner, co-CIO at Truist, said there was a comment that could be construed as dovish, but there were also equal amounts of concern from Fed officials about inflation. The minutes said Fed officials believed it would be appropriate at some point to slow the pace of rate hikes while assessing the impact on the economy and inflation.

“The market is moving, but it’s kind of a light day in terms of news, and I don’t think this is a big change or shift from what people were thinking before the report,” Lerner said.

–Patti Domm

Progressive hits all-time high

Shares of insurance company Progressive hit an all-time high on Wednesday, trading as high as $127.43 per share, after the company said it earned nearly $700 million in net income in July.

Progressive said that its combined ratio was 89.8% in July, down from 96.7% a year ago. Combined ratio is a measure of profitability for insurance firms, and lower scores indicate better performance.

MKM Partners analyst Harry Fong said in a note that this represented “dramatic improvement.”

“With underwriting well below its overall long- term goal of writing to a 96% combined ratio or better, it can easily turn up marketing initiatives to grow again. Its underwriting results in personal auto are by far better than any other insurers we’ve seen recently,” Fong wrote.

Progressive is up more than 20% this year. Insurance stocks are often seen as a beneficiary of higher interest rates, which may be helping Progressive outperform.

Progressive was last up roughly 3.2% near $126.46 per share.

— Jesse Pound

Fed plans to hike rates to a ‘restrictive’ level, minutes show

The minutes from the Federal Reserve’s July meeting shows that central bankers plan to continue rate hikes in order to bring down inflation.

“With inflation remaining well above the Committee’s objective, participants judged that moving to a restrictive stance of policy was required to meet the Committee’s legislative mandate to promote maximum employment and price stability,” the minutes said.

The Fed has hiked by three quarters of a percentage point at each of its last two meetings. However, the central bank signaled that it could slow that pace in the coming months as those historically large moves take full effect.

“Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation,” the minutes said.

Some of the meeting participants indicated that the Fed should keep rates at a restrictive level “for some time” even after slowing the hikes.

The minutes also showed that Fed is worried about inflation and the economic environment possibly worsening from here.

“Uncertainty about the medium-term course of inflation remained high, and the balance of inflation risks remained skewed to the upside, with several participants highlighting the possibility of further supply shocks arising from commodity markets,” the minutes said. “Participants saw the risks to the outlook for real GDP growth as primarily being to the downside.”

— Jesse Pound

Apple shares rise, bucking the tech decline

Apple CEO Tim Cook walks during Apple’s annual Worldwide Developers Conference in San Jose, California, June 6, 2022.

Peter Dasilva | Reuters

Shares of Apple rose Wednesday, bucking a broader decline in tech stocks, with the Nasdaq Composite the worst performing of the major averages. The tech-heavy index is down 1.2%.

The tech stock advanced 1.3% on Wednesday. Apple is down just 1% this year, outpacing other mega-cap tech stocks such as Amazon and Alphabet, which are down nearly 15% and 17% over the same time period.

It’s also up nearly 28% in the current quarter, and roughly 4% off its all-time high.

Some investors expect that Apple will continue to fare better than its rivals during a period of rising interest rates and high inflation. Apple expects that iPhone sales will remain strong, even as slowing consumer demand hurts global smartphone sales.

The tech giant is expected to hold a September 7 launch event to unveil the iPhone 14, according to a Bloomberg report citing people familiar with the matter.

— Sarah Min

‘Dr. Doom’ Henry Kaufman says the Fed is failing in its fight against inflation

Influential investor Henry Kaufman believes the Federal Reserve is still behind the curve even as it raised interest rates aggressively this year.

In an interview with the Financial Times, the 94-year-old market veteran called on Chairman Jerome Powell to take bold action to combat surging prices.

“I am still waiting for him to act boldly — ‘boldly’ means he has to shock the market,” Kaufman said of Powell. “If you want to change someone’s view, if you want to change someone’s action, you can’t slap them on the hand, you have to hit them in the face.”

The Fed enacted its second consecutive 0.75 percentage point rate increase last month, taking its benchmark rate to a range of 2.25%-2.5%. However, Kaufman said there’s still a long way to go in the Fed’s tightening cycle as inflation rate is still a lot higher than interest rates.

Kaufman made his name by predicting the market bottom on August 17, 1982, which marked the beginning of the longest bull market in history.

— Yun Li

Searching for stocks that reclaimed their long-term positive trend

Some stocks are reclaiming their long-term positive trend as markets rebound off their mid-June lows, according to a technical analysis from CNBC Pro.

Our stock screen surfaced 11 names that have climbed back above their 200-day moving averages, and also outperformed the rally in the broader market. What’s more, they’re expected to advance further from here.

Check out the stocks in our CNBC Pro screen.

— Sarah Min

July retail sales suggest ‘no imminent recession,’ Evercore ISI’s Shipley says

Despite disappointingly flat retail sales data for July, there are some positive signs coming out of the report.

“This release suggests no imminent recession, but in aggregate should weigh down Treasury yields, the dollar and retail stocks,” Evercore ISI’s Stan Shipley said in a note to clients Wednesday.

While the data showed weakness in areas like auto sales, other sectors saw continued consumer spending. Some discretionary areas rose slightly while online sales rose 2.7%, a sign that consumers continue to spend even in the face of rising inflation.

“With a still strong labor market and gasoline prices easing, the all-important US consumer continues to spend, but big-ticket items such as automobiles are lagging,” wrote Quincy Krosby, chief global strategist, at LPL Financial.

This key indicator with a perfect track record means stocks haven’t bottomed yet

According to the Rule of 20 – one of Bank of America’s key indicators to spot a market bottom – stocks still have further to fall.

The Rule of 20 measures the price to earnings ratio and consumer price index, and has a perfect track record of spotting the bottom in stocks. Currently, the rule is above 20, which means the upward momentum in stocks is likely a bear market rally instead of a sprint to a new bull cycle.

Read more at CNBC PRO.

—Carmen Reinicke

Bond yields sharply higher as market worries about inflation and fears Fed minutes will be hawkish

The benchmark 10-year Treasury yield was sharply higher Wednesday on concerns about inflation and a hawkish Federal Reserve.

Strategists say U.K. inflation data and strong U.S. retail sales were catalysts for yields, as investors worried the Fed could be more aggressive with its rate hiking.

“Particularly today, with the minutes looming, that’s the concern,” said Michael Schumacher of Wells Fargo. “The Fed minutes could be hawkish.” The Fed releases minutes of its last meeting at 2 p.m. ET.

The 10-year was at 2.89% late Wednesday morning, up from 2.80% at the end of Tuesday’s trading. The yield, which moves opposite price, was higher early in the day, on a report that U.K. inflation was running at 10.1%, a 40-year high.

Then U.S. retail sales, released at 8:30 a.m. ET, pushed the yield even higher. On the headline, retail sales were flat for July, but excluding autos and gas, sales rose a higher-than-expected 0.7%.

The minutes are from the July 26 and 27 meeting, where the Federal Open Market Committee voted to raise the fed funds target rate by another three-quarters of a point.

The 2-year yield, which most reflects Fed policy, was at 3.33%, about 10 basis points from its intraday low.

–Patti Domm

Oil reverses losses, turns positive after inventory report

Oil prices moved higher after the latest inventory report, which showed a larger-than-expected draw. The Energy Information Administration said Wednesday that stockpiles in the prior week declined by 7.1 million barrels. Analysts had been expecting a draw of 250,000 barrels, according to estimates from FactSet.

West Texas Intermediate crude, the U.S. oil benchmark, added 50 cents to trade at $87.03 per barrel. Earlier in the session the contract fell to its lowest level in more than six months. International benchmark Brent crude was at $92.69 for a gain of 0.4%.

Natural gas retreated more than 1% to $9.21 per million British thermal units. The decline comes after a monster run for the commodity, which is up more than 30% in the last month and hovering around multi-year highs.

“Over the past few weeks the intense power burn coupled with very low injection into gas storage has led to a situation where domestic US gas supplies are very tight,” said Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings.

“Further, as the weather cools slackening power demand/gas burn, natural gas will still be diverted from storage into LNG trains for European and Asian exports,” he added.

— Pippa Stevens

Analog Devices sinks 5% on bookings warning, chip stocks slide

Travel stocks slump, Carnival falls 5%

Travel stocks fell on Wednesday, dragging the S&P 500’s consumer discretionary sector down nearly 2%.

Cruise stocks led the tumble, with shares of Carnival, Norwegian Cruise Line and Royal Caribbean down about 5% each. Hotel and casino stocks including Wynn Resorts, MGM Resorts and Marriott slid 3.8%, 2.5% and 2.1%, respectively.

— Samantha Subin

Tech shares slide

Tech shares slumped on Wednesday. Share of Alphabet and Tesla fell more than 1% each, while Netflix, Amazon and Meta Platforms slumped by more than 2%.

Several S&P 500 sectors also showed signs of weakness as tech shares slipped. Consumer discretionary, information technology and communications services each fell more than 1%. Materials also fell 1%, dragged down by names like Freeport-McMoRan and PPG Industries.

— Samantha Subin

S&P 500 failed first test of key chart level, could signal some near-term weakness

Traders on the floor of the NYSE, Aug. 16, 2022.

Source: NYSE

The S&P 500 fell back after testing its 200-day moving average Tuesday, signaling the index may have set a possible short-term top.

The S&P reached a high of 4,325 Tuesday, before backing off. The 200-day moving average was just a point above that level at the time, and it was at 4,324 in Wednesday trading. The S&P 500 was down 0.7% at 4,272 just before 10:30 a.m. ET.

“It’s pretty typical of the first attempt at a 200-day,” said BTIG’s Jonathan Krinsky. “When a 200-day is declining and you’re rallying from the underside, it’s a pretty typical to fail the first time. That doesn’t tell us much…The confirmation lower today is suggestive of further declines. We’re due for a pullback. 4,177 to 4,200 is now key support.”

The 200-day is simply the average of the last 200 closes of a stock or an index. Traders watch it as a momentum indicator. A close above it can signal a move higher, and when an index breaks below it, it could be in for a more prolonged downtrend.

“Typically you get rejected there. If you were to get back there again, it has better success,” said Scott Redler, partner with “It doesn’t mean we have to get back there again. Within the last week, there’s been a lot of meme-type trading, lots of things got overbought. It felt more forced than sustainable. At this point, there’s a 70% chance yesterday’s high is the August top.”

But if the index should take another run at the 200-day and close above that level, traders would take it as a positive signal for the market.

— Patti Domm

Stocks open lower

Stocks opened lower on Wednesday as Wall Street combed through new retail data and looked ahead to the release of minutes from the Federal Reserve’s recent meeting.

The Dow last traded 213 points, or 0.62%, lower. The S&P and Nasdaq fell 0.85% and 1.19%, respectively.

— Samantha Subin

Retail sales flat in July as falling prices hit gas station receipts

Retail sales were flat in July as falling fuel prices depressed gas station receipts and shoppers used the savings to spend in other areas.

The zero gain in monthly sales was slightly less than the 0.1% Dow Jones estimate, while ex-autos gain of 0.4% was better than the flat expectation.

Gas station sales fell 1.8% for the month, though they rose just shy of 40% for the year. Online sales increased 2.7% while bar and restaurant sales rose just 0.1%.

Teladoc slides after Guggenheim says sell

Teladoc Health shed more than 5% in premarket trading Wednesday after Guggenheim said now is the time to sell the company following its Covid-pandemic boom.

Going forward, revenue growth is poised to decelerate as momentum from the pandemic wanes, according to the firm.

Read more on CNBC PRO.

—Carmen Reinicke

Weber shares slip after downgrade

Weber, which plans to trade on the New York Stock Exchange under the ticker ‘WEBR’ could be valued between $4 billion and $6 billion.

Scott Olson | Getty Images

Shares of grill-maker Weber slipped nearly 5% in premarket trading Wednesday after Citi downgraded the stock to sell.

The stock could fall an additional 65% from current levels on weak sales, according to Citi.

Bed Bath & Beyond pops again as meme rally builds

Shares of Bed Bath & Beyond surged more than 30% in premarket trading as the revival of the Reddit-fueled meme craze showed no signs of slowing down.

Bed Bath & Beyond has already seen five days this month with moves of at least 20%. The stock is up nearly 300% for August as of Tuesday’s close.

The volume of trading in Bed Bath & Beyond has also been abnormally high. On Tuesday, more than 395 million shares traded hands, according to FactSet.

— Jesse Pound

Fed minutes to be released; markets looking for hints on September move

The Federal Reserve will release minutes from its July 26-27 meeting, with markets looking for hints on what is coming in September. The meeting summary will come out at 2 p.m.

As part of the ongoing effort to beat back inflation, the rate-setting Federal Open Market Committee voted to increase interest rates by 0.75 percentage point for the second consecutive time. That took the Fed’s benchmark borrowing rate to a range of 2.25%-2.5%.

Chairman Jerome Powell said at his post-meeting news conference that the Fed likely will slow the pace of rate hikes after policy tightens further, and markets took that to mean that the central bank could dial back its moves soon.

However, market pricing is closely divided, with a slight tilt to a third consecutive three-quarter-point hike next month, according to the CME Group’s FedWatch tool.

Nomura economists said the minutes likely will show that “all options are on the table” for the September session.

“Beyond September, we believe comments will likely suggest a firmer consensus that rates will need to move more deeply into restrictive territory and rate cuts are unlikely until inflation moves much closer to target, regardless of incoming activity data,” the firm said.

—Jeff Cox

Mortgage rates slip but demand falls

Demand for mortgages fell 2.3% to its lowest level in 22 years last week even as rates slipped.

Mortgage applications to purchase a home fell 1% for the week and 18% from a year ago. Total volume also slipped 2% from the previous week.

At the same time, the average rate on the 30-year fixed rate dropped to 5.45% from 5.47% the week before.

— Samantha Subin

Lowe’s shares pop after earnings release

Lowe’s shares traded more than 3% higher in the premarket after the home improvement retailer posted a profit that beat analyst expectations.

The company earned $4.67 per share, adjusted, beating a Refinitiv consensus forecast of $4.58 per share. Lowe’s said sales to do-it-yourself consumers suffered last quarter, but noted that this was partially offset by increased sales to professionals.

—Fred Imbert, Jack Stebbins

Target posts huge earnings miss

Employees assist customers at the checkout area of a supermarket on May 11, 2022 in New York City.

Liao Pan | China News Service | Getty Images

Target reported a big earnings miss, as the retailer tries to sell off unwanted inventory.

The company earned 39 cents per share in the previous quarter. That’s well below a Refinitiv consensus forecast of 72 cents per share and represents a drop of nearly 90% from the year-earlier period.

“If we hadn’t dealt with our excess inventory head on, we could have avoided some short-term pain on the profit line, but that would have hampered our longer-term potential,” CFO Michael Fiddelke said in a statement.

Trading in Target shares was choppy after the release, with the stock last down 2%.

Fred Imbert, Melissa Repko

European markets nudge higher, struggling to build momentum

European markets were cautiously higher on Wednesday after a rally on Wall Street, having struggled to build positive momentum so far this week.

The pan-European Stoxx 600 added 0.2% in early trade, with banks rising 0.7% while basic resources slipped 0.3% lower.

Investors in Europe are tracking preliminary gross domestic product data from the euro zone for the second quarter, as well as unemployment figures for the single currency bloc and the latest U.K. inflation figures for July.

UK inflation hits new 40-year high of 10.1% as food and energy price surge continues

U.K. inflation rose to another 40-year high in July as spiraling food and energy prices continued to intensify the country’s historic squeeze on households.

The consumer price index rose 10.1% annually, according to estimates published by the Office for National Statistics on Wednesday, above a Reuters consensus forecast of 9.8% and up from 9.4% in June.

Core inflation, which excludes energy, food, alcohol and tobacco, came in at 6.2% in the year to July 2022, rising from 5.8% in June and ahead of projections of 5.9%.

Rising food prices made the largest upward contribution to annual inflation rates between June and July, the ONS said in its report.

– Elliot Smith

CNBC Pro: Have markets hit the bottom? Strategist reveals the indicators to watch

A strong rebound in U.S. equities has sparked hope that the market has bottomed. But is the bear market truly behind us now?

Strategist Victoria Fernandez weighed in, and revealed the key indicators she is watching.

Pro subscribers can read the story here.

— Zavier Ong

CNBC Pro: Is ‘super cheap’ Meta a buy? Here’s what tech investor Paul Meeks says

Meta, like most tech stocks, has fallen sharply this year, and now investors might be wondering whether it’s time to buy the dip.

Paul Meeks, portfolio manager at Independent Solutions Wealth Management, explains whether he thinks investors should buy or skip this stock, and why.

Pro subscribers can read the story here.

— Weizhen Tan

Retail sales data to be released early Wednesday

MIAMI BEACH, FLORIDA – DECEMBER 14: A person passes a 30% off sign on display in a store at the Lincoln Road mall on December 14, 2021 in Miami Beach, Florida. Reports indicate that some retailers do not have the holiday sale specials that shoppers expect to find this time of the year. Retailers are blaming inflation and supply chain challenges for not being able to slash prices as much as they traditionally would. (Photo by Joe Raedle/Getty Images)

Joe Raedle | Getty Images News | Getty Images

As investors digest earnings, they’re also looking to U.S. retail sales data for the month of July for clues on how consumers are managing the impact of rising inflation and high gasoline prices.

Economists expect the report to show consumers increased spending just 0.1% in the month, according to Dow Jones. The release is scheduled for 8:30 Wednesday morning.

Retail sales rose 1% in June, with gasoline stations, online sales, and bars and restaurants being some of the biggest contributors.

— Tanaya Macheel

Target and Lowe’s earnings on deck

The S&P 500’s best earnings season rally since 2009

Bespoke Investment Group’s Paul Hickey said the S&P 500 is seeing its best earnings season rally since 2009.

“Analyst sentiment had become extremely negative heading into this reporting period, [with] the pace of negative revisions outnumbering positive revisions by levels you don’t see too often,” he said on CNBC’s “Closing Bell: Overtime.” “The bar was set very low, and we rallied about 10% this earnings season. The best earnings season going back to 2008 was the second-quarter reporting period of 2009.”

Typically with a rally of 5% during earnings season, the question becomes whether or not investors have borrowed from the future, but historically, that’s not necessarily the case, he added.

“Instead of borrowing from the future, we’re getting payback from, say, the loan we gave in June coming into earnings season, when the market just vomited concerns that this was going to be an earnings disaster and when we sort of reached peak fed panic over inflation.”

— Tanaya Macheel

Read the full article here


Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice



For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

Read the full article here

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Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024



Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

More from Personal Finance:
10 ways to avoid the early withdrawal penalty for IRAs
Retirement savers with lower incomes may be getting a federal ‘match’
‘Best’ ways to maximize your tax deduction for charitable gifts

The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.

Read the full article here

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Goldman grumbling grows for banking giant to sack CEO David Solomon



The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
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Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
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“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

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