🧰 Labor market strengthens

and stocks fall amidst political tension

Good morning investors! The market fell yesterday, including Bitcoin that is now once again hovering around $63,000 as all eyes are on the Middle East.

Today we cover:

  • Labor market grows

  • Construction spending declines

  • Stocks suffer

📊 Economy and News 

Labor market continues to strengthen

Job openings in the U.S. increased in August, suggesting continued strength in the labor market, which is closely watched by the Federal Reserve.

The Bureau of Labor Statistics reported 8.04 million job vacancies for August, up from a revised 7.71 million in July. This represents about 1.1 available jobs for every individual seeking employment, according to the latest data.

Economists had anticipated job openings to reach 7.682 million, just slightly above July’s initial estimate, based on FactSet consensus.

Industries such as construction, transportation, warehousing, utilities, and state and local government (excluding education) saw the largest rise in job openings. In contrast, several service sectors, including finance and arts and entertainment, experienced a decline.

While hiring in August slowed, it remained consistent with trends from the past few months. Layoffs also decreased, indicating that large-scale job cuts are still not a major concern.

Global hits:

Bad News: CVS Health to lay off nearly 3,000 workers in cost-cutting drive. Elsewhere, Stellantis has recalled 194,000 Jeep plug-in hybrids over fire risks.

US Construction Spending: U.S. construction spending unexpectedly fell by 0.1% in August, following a revised 0.5% decline in July, with a sharp drop in single-family housing projects. However, declining borrowing costs may boost activity in the coming months. According to reports, construction spending increased 4.1% on a year-on-year basis in August.

All about Arab: Abu Dhabi’s ADNOC to acquire German chemicals firm Covestro for $16.4 billion. On the other hand, Saudi Arabia slashes growth forecasts, sees wider budget deficits. Real GDP is expected to grow 0.8% this year, in a dramatic drop from a previous estimate of 4.4%. Also, the tension in the Middle East is only worsening with Iran launching an attack on Israel.

📈 Stocks

S&P 500 45,708.75 (-0.93%)
DJIA 42,156.97 (-0.41%)
NASDAQ 17,910.36 (-1.53%)
BRENT CRUDE 74.24 (+3.56%)
* Prices as of Oct 2nd, 12:20 AM UTC

Middle East Tensions Rise Causing Stocks to Slip

Stocks dropped Tuesday as Middle East tensions dampened investor optimism following a strong quarter. West Texas Intermediate crude oil spiked after the Israel Defense Forces reported an Iranian missile attack, pushing the CBOE Volatility Index (VIX) above 20.

Despite this, oil later retreated, and stocks recovered from their lows as traders hoped for minimal damage and retaliation. About 60% of S&P 500 stocks declined, though energy stocks gained nearly 2%. Tesla, Nvidia, and Apple fell over -3%, while Meta rose near all-time highs. The Russell 2000 slid over 1%, reflecting losses in small-cap stocks.

On the other hand, Chinese stocks continued to do well with both Alibaba and Nio jumping over +5% each.

Lastly, Nike shares moved lower afterhours as the athletic apparel withdrew full-year guidance and said it was postponing its investor day, which had been scheduled for November. Nike beat earnings expectations by 18 cents, but it fell short on revenue as it works to fix its product assortment and rework its approach to innovation.

Chinese EVs Shine: New energy vehicles, including hybrids and battery-powered cars, made up over half of new passenger car sales in China during July and August. Li Auto delivered 53,709 vehicles in September, surpassing its previous record by more than 5%.

Zeekr, an electric car company owned by Geely, also hit a record with 21,333 deliveries. Meanwhile, Xpeng reported 21,352 deliveries, boosted by over 10,000 units of its new Mona brand’s M03 coupe, launched in late August.

These models, along with others from Chinese competitors, are priced below comparable Tesla models. The Tesla Model Y SUV starts at 249,900 yuan ($35,630), while the Model 3 begins at 231,900 yuan.

The September milestones set Li Auto and Xpeng on course to exceed their delivery targets. However, Zeekr fell slightly short of the monthly average needed to meet its annual goal.

Good News: Mastercard to buy Swedish startup that makes it easier to manage and cancel subscription plans.

💵 Personal Finance

Health savings accounts and how they can help you save tax money

Today we’ll talk about Health Savings Accounts and how they can help save tax money. These types of accounts are offered in the U.S., China, Singapore and South Africa.

Health Savings Accounts (HSAs)

HSAs can be defined as “savings accounts used in conjunction with a high-deductible health insurance policy that allows users to save money tax-free against medical expenses." You must have a high-deductible health insurance plan to make contributions.

In simple words, these tax-deductible savings plans are used to put aside pre-tax money for future health-related expenses. The account is set up with a trustee with some terms and conditions.

There are presently no income limits but annual deductible limits are typically revised every few years. For 2024, the limit is $1,600 for self-only coverage and $3,200 for a family plan.

Contribution limits

As mentioned earlier, contribution limits exist: $3,850 for self-only coverage and $7,750 for family coverage.

Employers can match contributions and the amount contributed by your employer is also included in these limits. However, individuals that are 55 or older can contribute an additional $1,000 with the option to make this contribution anytime during the year.

For 2024, the limits stand at $4,150 for self-only coverage and $8,300 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.

How do these accounts impact taxes?

HSA contributions (by payroll or direct) are excluded from the employee’s taxable income, i.e.: are tax-deductible. You generally have until the tax filing deadline to contribute to an HSA. For tax year 2024, you can make contributions up until April 15, 2025.

These contributions appear on Form 1040 as an adjustment to income. On the plus side, you're not required to take these contributions as an itemized deduction, which proves to be beneficial as itemized medical deductions come with certain limitations or caps. Also, since only 13.7% of taxpayers itemize, this can prove to be quite advantageous.

In addition, all sorts of earnings related to your HSA, including dividends and interest, are tax exempt and hence not included in your return.

Note: Contributions made by your employer cannot be claimed as a tax deduction; however, can be excluded from your gross income.

Withdrawing from your HSA

Withdrawals are tax-free given that they meet eligibility requirements as defined in IRS Publication 502, Medical and Dental Expenses. Examples include surgery costs, medical procedure costs, guide dogs, and birth control pills. On the plus side, money can be withdrawn anytime.

In addition, fuel spent traveling to and from the clinic or hospital is also included but items that aren't necessary such as gym membership and nutrient capsules aren't included.

💰 Be a Better Investor

“Wealth is when small efforts produce big results. Poverty is when big efforts produce small results.”

Unknown

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👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.