Market Week: October 31, 2011

The Markets Double-barreled relief over the economy and the plan for attacking the European debt crisis powered a rally in equities. In the wake of Thursday's 340-point jump in the Dow, the industrials were closing in on their best month since January 1987 with a 12% gain, and the Russell 2000's 18% gain since September 30 will likely make October its best month ever. By Friday, the S&P 500 and the Nasdaq had regained roughly three-fourths of their losses since mid-July. The renewed global optimism sent bond yields up.

Last Week's Headlines

• Eurozone leaders finally announced an agreement they hope will build a firewall around Europe's sovereign debt problems and enable banks to keep credit flowing in the region. Under the agreement, banks holding Greek debt will receive 50% of what they're owed, in hopes that the reduction will enable Greece to cut its debt to 120% of its gross domestic product (GDP) by 2020. To help cushion future losses, banks will have to raise €147 billion to cover higher capital reserves. The agreement also would raise the resources of the European Financial Stability Facility to roughly €1.4 trillion, though there were no details on how the increase would be paid for. Finally, the agreement allows the EFSF to maximize its resources by guaranteeing sovereign bonds or setting up special-purpose vehicles to provide financial support.

• The odds of a double-dip recession seemed to dim after the Commerce Department said the economy grew almost twice as fast in the third quarter as it did during the second. The 2.5% initial estimate of growth surpassed Q2's 1.3% and Q1's anemic 0.4%. The report also said that consumer spending rose 2.4%, including a 4.1% increase in durable goods and 3% growth in spending on services. Exports were up 4%, and business capital spending jumped 16.3%. Government spending was unchanged as a 1.3% drop in state and local government spending helped offset a 2% increase in federal government spending.
• Home prices rose in August in the 20 cities tracked by the S&P/Case-Shiller index. Though prices were still 3.8% lower than a year earlier, the increase was the fifth in a row, suggesting that prices could be starting to stabilize. Meanwhile, the Commerce Department said sales of new single-family homes were up 5.7% in September.
• Americans spent more and saved less in September; according to the Bureau of Economic Analysis, consumer spending was up 0.6%, while the savings rate dipped to 3.6% from 4.1% the month before. Meanwhile, incomes rose 0.1%.
• A drop in orders for transportation equipment led to a 0.8% decrease in new durable goods orders in September. The Commerce Department said it was the third straight month of declines.
• The more income you had over the last two decades, the more income you got, according to a study by the nonpartisan Congressional Budget Office. For the 1% of the population with the highest income, average real after-tax income rose 275% between 1979 and 2007. Households in the top 20% saw a 65% increase in income, while for the 60% of the population in the middle, incomes grew just under 40%. Those in the bottom 20% saw an 18% increase from 1969 to 2007. The CBO said the shift in overall pre-tax income (not counting taxes and payments such as Medicare/Social Security benefits) was caused by two factors. Income sources, such as jobs, became increasingly concentrated in fewer individuals (the most important factor); also, capital gains and business income represented a larger percentage of overall U.S. income, while the share of income from salaries and wages fell.

Eye on the Week Ahead

Earnings reports should receive more attention now that a European rescue operation has been announced (though details of the debt game plan also will be under scrutiny). Unemployment data will be of interest in light of the new GDP number, as will the Fed's Wednesday announcement.

Key dates and data releases: U.S. manufacturing, auto sales, construction spending (11/1); Federal Reserve Open Markets Committee (FOMC) meeting (11/2); weekly new jobless claims (11/3); business productivity, factory orders, U.S. services sector (11/3); unemployment/payrolls (11/4).

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Data sources: Includes data provided by Brounes & Associates. Index historical performance based on data from theStock Trader's Almanac 2011. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: October 24, 2011

The Markets A tug-of-war between earnings and Europe dominated equities last week. The Dow industrials overcame a discouraging start to the week and managed a third straight week of gains. However, the Nasdaq slipped back into the loss column, while the S&P 500's encouraging week still left it in negative territory for the year and the small-cap Russell 2000 continued to struggle.

Last Week's Headlines Despite strong words from G-20 finance ministers about the need for a formal plan for containing the damage from European debt problems, the eurozone continued to debate ways to enhance the European Financial Stability Facility's resources. However, any formal agreement failed to appear last week, though French and German leaders said they anticipated having one this week. In the meantime, Moody's warned that France's AAA debt could be hit with a negative outlook if its budget is strained by bailout demands; it also downgraded Spain's debt from Aa2 to A1. September's 0.3% consumer inflation rate was the third increase in as many months. According to the Bureau of Labor Statistics, that put the inflation rate for the last 12 months at 2%. At the wholesale level, inflation was worse; driven mostly by a 2.3% jump in energy costs and a 10% increase in the prices of vegetables, it spiked up 0.8% in September, for a 6.9% rate for the last year. Federal Reserve manufacturing numbers were mixed. The New York region was negative for a fifth straight month, while new orders were flat. However, the Philadelphia Fed survey showed improvement, jumping from -17.5 in September to 8.7, the first positive number in three months. Nationwide, industrial production rose 0.2% in September and was 3.2% higher than a year ago. China's efforts to try to control inflation there contributed to a slower pace of economic growth--9.1%--during the third quarter. According to China's National Bureau of Statistics, that's down from Q2's 9.5%. Housing starts shot up 15% in September, putting them 10.2% above last year. According to the Commerce Department, that's the highest level since before the homeowner's tax credit expired last year. Building permits, an indicator of future construction activity, fell 5% from August, though they also were up from a year ago. Sales of existing homes dropped 3% in September, according to the National Association of Realtors®, though compared to the previous September, they were up 11.3%. Eye on the Week Ahead Action or lack thereof at the midweek European debt summit is likely to affect the mood of the markets. A first look at Q3 economic growth also will be of interest. Key dates and data releases: home prices, consumer confidence (10/25); new home sales, durable goods orders (10/26); initial estimate of Q3 gross domestic product, pending home sales, weekly new jobless claims (10/27); personal income/spending, labor costs, consumer sentiment (10/28). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: October 17, 2011

The Markets Welcome relief: Equities built strongly on last week's gains as the Dow and Nasdaq surged back into positive territory for 2011. The S&P 500, NASDAQ, and Russell 2000 all had their strongest week of the year, with the tech-heavy NASDAQ and the small-cap Russell seeing the biggest gains. Little Slovakia provided at least some temporary reassurance about European bailout capabilities, which encouraged investors to drive bond yields higher as prices fell.

Last Week's Headlines After an initial negative vote, Slovakia provided the final ratification of expanded powers for the European Financial Stability Facility (EFSF), enabling it to buy bonds issued by troubled eurozone countries. Meanwhile, there were more ratings downgrades: Standard & Poor's cut Spain to AA- with a negative outlook, indicating additional downgrades are likely in the future. It also downgraded several Spanish banks, while Fitch cut the ratings of four other European banks. A 1.1% improvement in September's retail sales represented the biggest increase in seven months, though the figures are not adjusted for price increases. A 3.6% increase in auto sales helped a lot after having been hurt earlier in the year by parts shortages. According to the Commerce Department, even without autos, retail sales still rose 0.6%. Minutes of last month's Federal Reserve Open Markets Committee (FOMC) showed that members seem to be as divided as the rest of the country over whether and how to stimulate the economy. Some felt the Fed's recent decision to tweak its bond portfolio was not necessary; others argued for more aggressive measures. Eye on the Week Ahead As earnings season gets into high gear, several bellwether banks and tech companies are scheduled to report. Two key manufacturing surveys and inflation data also will serve as economic indicators. Key dates and data releases: Empire State manufacturing survey, industrial production (10/17); wholesale inflation, international capital flows, housing market (10/18); consumer inflation, housing starts, Fed "beige book" report (10/19); weekly new jobless claims, home resales, Philadelphia Fed survey (10/20). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: October 11, 2011

The Markets Domestic equities once again spent much of the week recuperating from damage done on Monday, hitting their lowest levels of the year before rebounding strongly. On Monday, the S&P closed below 1,100 for the first time this year; despite advancing the rest of the week, it couldn't quite recapture the previous week's 1,175 high. The Nasdaq and Russell 2000 saw the strongest moves upward, gaining 6.1% and 7.7% respectively between the closing bells on Monday and Friday. Bonds retreated in the face of equities' advances.

Last Week's Headlines

• Companies added 103,000 jobs to the nation's payrolls in September, including those of 45,000 striking telecommunications workers who returned to work. The Bureau of Labor Statistics also revised upward its estimates for previous months. However, the increase wasn't enough to budge the unemployment rate, which remained stuck at 9.1%. Professional and business services, health care, and construction saw gains, while government employment continued to fall.
• The European Central Bank (ECB) said it will resume bond purchases through October, 2012 and took measures to help ensure liquidity for European banks. The International Monetary Fund called for a coordinated plan to recapitalize European banks if necessary; French and German leaders said they agreed on the need to do so and would announce details by the end of the month.
• Eurozone finance ministers postponed a decision on whether to pay the next installment of financial assistance to Greece after the country announced it had not been able to meet the requisite deficit reduction targets. Meanwhile, Fitch Ratings downgraded both Italian and Spanish debt to A+ and AA- respectively, while Moody's downgraded Italy to A2. Outgoing ECB president Jean-Claude Trichet said it would be inappropriate for the ECB to lend money to the European Financial Stability Fund set up to offer financial assistance to struggling countries such as Greece. The ECB also kept its key interest rate at 1.5%.
• The U.S. services sector continued to grow in September, but somewhat more slowly; the Institute for Supply Management (ISM) said its index fell 0.3% to 53, though new orders rose 3.7%. Meanwhile, the ISM's index of U.S. manufacturing rose at a slightly faster pace (1%) than the previous month, with 12 of 18 industries reporting growth. However, the Commerce Department said new factory orders were down 0.2% in August after jumping 2.1% the month before.
• The average rate on a 30-year mortgage fell below 4% for the first time since Freddie Mac began keeping records.
• "Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new."--Steve Jobs, 1955-2011.

Eye on the Week Ahead

Investors will get something to react to this week besides Europe as Alcoa's after-the-bell report on Tuesday marks the unofficial start of the Q3 earnings season. However, Greece and European debt problems, including Thursday's Italian bond auction, will still be very much on the radar screen. Fed minutes could shed light on dissension in the ranks over how and whether monetary policy can and should provide further economic assistance, while retail sales will hint at the consumer mindset.

Key dates and data releases: Federal Open Markets Committee minutes (10/11); international trade, weekly new jobless claims (10/13); retail sales, import/export prices, business inventories, consumer sentiment (10/14).

Factoring Health-Care Costs into Retirement Planning There are many factors to consider in determining how much you'll need to save in order to enjoy a comfortable and financially secure retirement. One often overlooked retirement expense is the cost of health care. You may presume that when you reach age 65, Medicare will cover most health-care costs. However, Medicare currently only pays for a portion of the cost for most health-care services, leaving a potentially large amount of uninsured medical expenses. Without proper planning, health-care costs can sap retirement income in a hurry, leaving you financially strapped. How much will you need? How much you'll spend generally may depend on when you retire, how long you live, your health status, and the cost of medical care in your area. But the costs can add up. You won't have to pay for Medicare Part A hospital insurance (unless you don't qualify and have to buy into the program), but you will likely pay either $96.40 or $110.50 each month in 2011 for Medicare Part B physician's coverage (although you may pay higher premiums based on income and other factors), and an average of $30 per month for Medicare Part D prescription coverage. In addition, there are co-pays and deductibles to consider (e.g., after paying the first $162 in Part B expenses per year, you pay 20% of the Medicare-approved amount for services thereafter). The cost of health care is rising. The Centers for Medicare & Medicaid Services (CMS) reports that national health expenditures grew by 4% in 2009. And the CMS Office of the Actuary estimates that out-of-pocket spending is projected to grow at an average rate of 5% from 2015 through 2020. What can you do? It's clear that health care is an important factor in retirement planning. And while you may be able to buy a cheaper car, live in a smaller home, or take fewer vacations in order to stay within your retirement income budget, you can't do without necessary medical care. So what can you do? You can better prepare for these expenses by taking the following steps: Acknowledge that paying for health care in retirement is an issue to consider. Don't presume Medicare and Medigap insurance will cover all your expenses--they probably won't. Include potential health-care costs in your retirement plan. Evaluate your present health and project your future medical needs. That might be easier said than done, but taking stock of your overall health now and factoring in your family's health history may help you determine the type of care you might need in retirement. Are you currently being treated for high blood pressure or diabetes? Do you live a healthy lifestyle? Does heart disease run in your family? Understand what Medicare covers and what it costs. For instance, Medicare (Part A, Part B, and Part D) generally provides benefits for inpatient hospital care, medically necessary doctor's visits, and prescriptions. But Medicare doesn't cover everything. Examples of services generally not covered by Medicare include most chiropractic care, dental or vision care, and long-term care. You'll also have to account for deductibles, co-insurance costs for some services, and a monthly premium for Medicare Parts B and D. Consider the cost of supplemental insurance. Medigap plans are standardized policies sold by private insurance companies that pay for some or all of the costs not covered by Medicare. In addition to Medigap policies, other types of supplemental insurance include long-term care insurance, dental insurance, and vision insurance. The type and amount of coverage that's best for you depends on a number of factors, including how much premium you can afford, what benefits you need, your financial resources, your health, and your anticipated medical needs. Don't forget to factor in the cost of long-term care. The National Clearinghouse for Long-Term Care Information estimates that at least 70% of people over age 65 will require some long-term care services. Medicare does not pay for custodial (nonskilled) long-term care services, and Medicaid pays only if you and your spouse meet income and asset criteria. Save, save, save. You may have already begun saving for your retirement, but if you fail to include the cost of health care in your plan, you're likely leaving out a big expense. Your financial professional can help you figure out how much you may need to save and adjust your retirement planning strategies to account for potential health-care costs in retirement.
	Will living a healthy lifestyle reduce health-care costs in retirement? Not necessarily. While living a healthy lifestyle may aid in reducing annual health-care costs, that same lifestyle generally promotes longevity, which may translate to higher total health-care expenditures over a longer lifetime. The moral of the story is even if you're healthy, you still face illnesses and diseases, so don't wait until your health begins to fail to plan for these costs in retirement.

Making Benefit Decisions during Open Enrollment

The end of the year is traditionally open enrollment season, your annual opportunity to review your employer-provided benefit options and make elections for the upcoming plan year. Even if you're busy, take a look at the enrollment packets or information you receive from your employer. You generally only have a few weeks (or less) to make important decisions about your benefits, and with health-care costs rising, it's more important than ever to choose your benefits wisely.

Are you happy with your health plan?

During open enrollment season, many employers roll out new health plan options. Even if you're satisfied with your current health plan, it's a good idea to check out the plans your employer is offering for next year and compare these to your existing health coverage. If you decide to stick with the same health plan you have now, look for differences between this year's plan and next year's. Premiums, out-of-pocket costs, and coverage offered often change from one year to the next.

Some tips for reviewing your health plan:

• Start by reading any plan materials you've received in your open enrollment packet and find out as much as you can about your options. Look for a "What's New" section that spells out plan changes.
• List your expenses. These will vary from year to year, but what you've spent over the course of the last 12 months may be a good predictor of what you'll spend next year. Don't forget to include co-payments and deductibles, as well as dental, vision, and prescription drug expenses.
• Reevaluate your coverage to account for life changes. For example, getting married, having a baby, or retiring are events that should trigger a thorough review of your health coverage.
• Consider all out-of-pocket costs, not just the premium you'll pay. For example, if you frequently fill prescriptions, you may save money with a plan that offers the broadest prescription drug coverage with the lowest co-payments, even if it charges a higher premium than other plans.
• Compare your coverage to your spouse's if he or she is eligible for employer-sponsored health insurance. Will you come out ahead if you switch to your spouse's plan? If you have children, which plan best suits their needs?
• Take advantage of technology. Some employers offer calculators or tables that allow you to do a side-by-side comparison of health plans to help select the best option.

Should you contribute to a flexible spending account?

You can help offset your health-care costs by contributing pretax dollars to a health flexible spending account (FSA) or reduce your child-care expenses by contributing to a dependent care FSA. The money you contribute is not subject to federal income and Social Security taxes (nor generally to state and local income taxes) and you can use these tax-free dollars to pay for health-care costs not covered by insurance or for dependent care expenses.

If your employer offers you the chance to participate in one or both types of FSAs, you'll need to estimate your expenses for the upcoming year in order to decide how much to contribute (subject to limits). Your contributions will be deducted, pretax, from your paycheck. If you're currently participating in an FSA, it's also an ideal time to find out how much money you have in this year's account. Unused contributions are lost if you don't spend them by the end of your benefit period. And remember, you must enroll each year--you won't automatically be reenrolled in a health or dependent care FSA.

What other benefits or incentives are available?

Health insurance coverage is a valuable benefit, especially if your employer pays a large percentage of the cost, but many employers offer other voluntary benefits such as dental care, vision coverage, disability insurance, life insurance, and long-term care insurance. Even if your employer doesn't contribute toward the premium cost, you may be able to conveniently pay premiums via payroll deduction.

Many employers sweeten benefit packages by offering discounts on various health-related products and services, such as gym memberships, wellness programs, and eyeglasses. Find out what your employer offers--otherwise you may miss out on some saving opportunities. Your employer may also offer incentives for employees who take steps to maintain a healthy lifestyle. For example, you may be eligible for a monetary reward for completing a health assessment, or you may be reimbursed for the cost of fitness classes.

Do you need more information?

Ask your benefits administrator for help if you have any questions about your health plan, the options available to you, or enrollment instructions or deadlines.

Ask the Experts: I'm retiring to a state with no income tax. Can my former state tax my retirement benefits?

The short answer is "no."

In the past, several states enacted "source tax" laws that attempted to tax retirement benefits if they were earned in that state, regardless of where a taxpayer resided when the benefits were ultimately paid. For example, if you earned a $50,000 annual pension while working in California, and then retired to Florida, California would attempt to tax those benefits, even though you were no longer a California resident.

But, in 1996, a federal law was enacted (P.L. 104-95) that prohibited states from taxing certain retirement benefits paid to nonresidents. As a result, if your retirement benefits are covered by the law (most are, see below), only the state in which you reside (or are domiciled) can tax those benefits.

Whether you're a resident of, or domiciled in, a state is determined by the laws of that particular state. In general, your residence is the place you actually live. Your domicile is your permanent legal residence; even if you don't currently live there, you have an intent to return and remain there.

The law applies to all qualified plans (this includes 401(k)s, profit-sharing plans, and defined benefit plans), IRAs, SEP-IRAs, Internal Revenue Section 403(a) annuities, Section 403(b) plans, Section 457(b) plans, and governmental plans.

The law provides only limited protection for nonqualified deferred compensation plan benefits. Benefits paid from nonqualified plans that are designed solely to pay benefits in excess of certain Internal Revenue Code limits (for example, Section 415 excess benefit plans) are covered by the law. Also covered are nonqualified plan (for example, top-hat plan) benefits that are paid over the employee's lifetime, or over a period of at least 10 years.

Examples of benefits that are not covered by the law include stock options, stock appreciation rights (SARs), and restricted stock.

Ask the Experts: What state tax issues should I consider when deciding where to retire?

If you're retired, or about to retire, you may be thinking about relocating to a state that has low (or no) income taxes, or that provides special tax benefits to retirees. Here are some state tax issues to investigate before making your move.

State income taxes typically account for a large percentage of the total taxes you pay. So, consider yourself lucky if you're planning a move to one of the seven no-income-tax states--Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming (New Hampshire and Tennessee impose income tax only on interest and dividends).

If you're considering a state that does impose an income tax, you'll need to know how that state treats Social Security and retirement income. Social Security is completely exempt from tax in more than half the states. Some states tax your Social Security benefits only if your income is above certain levels. Still others provide a general retirement income exclusion that takes Social Security benefits into account. Most of the remaining states tax Social Security benefits to the same extent they're taxed for federal income tax purposes.

Most states with an income tax fully or partially exempt retirement income--only California, Indiana, Nebraska, Rhode Island, and Vermont do not. But the exemptions vary considerably by state. Some states exempt public pensions from taxation but tax private pensions, or exempt public pensions earned in that state, but not public pensions earned in another state.

Some states exempt employer retirement benefits from tax, but not IRA income. Other states exempt a specific dollar amount of retirement income, but only if you've reached a certain age or have income within certain limits. In certain states, military pensions are fully or partially exempt, while in others they're fully taxable. Some states exempt defined benefit pension payments, but tax 401(k) benefits.

Remember that states may also impose many other kinds of taxes (for example, sales, real estate, and gift and estate taxes). Check to see if the state you're considering offers tax breaks to seniors, like property tax reductions, or additional exemptions, standard deductions, or credits based on age.

Year-End Investment Planning: The Clock Is Ticking

Investment planning at the end of 2010 was complicated by uncertainty over whether existing tax rates would be extended. This year, it's the congressional "supercommittee" charged with tackling the country's deficit financing problem that's the source of uncertainty. Even though you may not be sure how the committee's work might ultimately affect you, here are some factors to keep in mind as you plot your year-end strategy.

Harvest tax losses if appropriate

If you plan to harvest losses to offset capital gains, you may want to think about the cost basis of those shares. To maximize your losses for tax purposes, you would sell shares that have lost the most, which would enable you to offset more gains. Unless you specify which shares of stock are to be sold, your broker will typically treat them as sold based on the FIFO (first in, first out) method, meaning that the first shares bought are considered to be the first shares sold. However, you can designate specific shares as the ones sold or direct the broker to use a different method, such as LIFO (last in, first out) or highest in, first out. You can also use a standing order or instruction to specify that a particular method is to be used.

As of this year, brokers must report to the Internal Revenue Service your cost basis for the sale of any shares of stock bought after January 1, 2011. That will make it even more important to make sure when preparing your tax returns that your cost basis records for such sales are accurate and agree with those of your broker. If you decide to specify stock shares in order to determine your cost basis, you must do so by the settlement date (typically, three days after execution of the trade) in order for your broker's records for the stock sale to be accurate.

Mutual funds, dividend reinvestment plans, bonds, and other securities eventually also will be subject to the same mandatory cost basis reporting requirement.

Don't procrastinate on tax break for small business stock

If you plan to invest in a qualifying small business, you may want to do so by December 31. That's because 100% of any capital gains on the sale of qualified small business stock issued after September 27, 2010, and before January 1, 2012, can be excluded from your taxable income. (The exclusion is scheduled to revert to 50% next year.)

To claim the 100% exclusion, you must have acquired the stock at original issue (with some exceptions for stock acquired as an inheritance or gift). Also, the business must satisfy certain requirements, and you must hold the stock for at least five years. There are limits on the total amount of gain that is eligible for the exclusion. There also may be special considerations if you roll over the gain from the sale of your stock to another qualified small business stock, or if you receive qualified stock as part of your deferred compensation plan. Don't hesitate to get expert help with your specific situation.

Consider the potential impact of higher interest rates

Interest rates have been at historic lows in recent years, but as the economy continues to heal, that won't always be the case. The Federal Reserve Board has said that raising interest rates won't be its first step in reducing the support it has given the monetary system. However, at some point, interest rates are likely to begin moving up again. When that happens--and there's no way to know for sure when that might be--bond prices will begin to feel the impact. As bond yields begin to rise, bond prices will begin to tumble, since prices move in the opposite direction from bond yields.

Don't let payroll tax increase derail long-term plans

If you've benefitted from the 2% reduction in workers' Social Security taxes in 2011, congratulations! However, be aware that the provision is scheduled to expire at the end of this year. If you've been saving or investing that money, your long-term plans will benefit if you can figure out how to replace that source of funding for your investment efforts.

Market Week: October 3, 2011

The Markets Equities markets continued to be volatile as a rough quarter drew to a close. The Dow actually managed to end the week in positive territory, but the other domestic indices suffered. Treasuries backed off a bit after their recent strong run; the 10-year yield rose slightly as prices fell. Last Week's Headlines The German parliament voted overwhelmingly to increase its contribution to the European Financial Stability Facility and expand its bond-buying authority. Finland and Austria also agreed to expansion of the EFSF, which also requires approval by the other EU nations. Meanwhile, Greece adopted new property taxes in an attempt to balance its budget and qualify for its next round of bailout money. The final estimate of U.S. economic growth during the second quarter was 1.3%. That's slightly higher than the Bureau of Economic Analysis's previous 1% estimate, and an improvement from Q1's 0.4%. Nonresidential fixed investment, consumer spending, exports, and federal government spending were primarily responsible for the increase, though they were offset by reduced spending by state and local governments and by lower private inventory investments. Durable goods orders fell 0.1% in August, reversing July's 4.1% increase, according to the Department of Commerce. However, nondefense capital spending by businesses rose 1.1%, and shipments of capital goods were up 2.8%. Sales of new single-family homes fell 2.3% in August, the Commerce Department said, but were 6.1% higher than in August 2010. The number of homes sold was the lowest since February; the inventory of unsold homes on the market--more than 6 months' worth--was relatively unchanged. However, home prices were on the rise, up an average of 0.9% in July for the 20 cities measured by the S&P/Case-Shiller index. It was the fourth straight month of increases; however, prices were still 4.1% below July 2010. Personal incomes fell 0.1% in August, while spending rose 0.2%, according to the Bureau of Economic Analysis. Eye on the Week Ahead As the new quarter begins, the eurozone debt watch will focus on whether Greece has done enough to reduce its deficit in order to qualify for this month's bailout payment. Friday's unemployment data will also be of interest. Key dates and data releases: U.S. manufacturing, construction spending (10/3); factory orders (10/4); U.S. services sector (10/5); weekly new jobless claims (10/6); unemployment/payrolls, wholesale trade, consumer credit (10/7). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.