Wall Street closes out its best month in more than a year
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Stocks closed mostly higher Thursday as the market ended November with its biggest monthly gain in more than a year.
The S&P 500 rose 0.4% after drifting between small gains and losses. The benchmark index rose 8.9% in November, its biggest monthly gain since July 2022.
The Dow Jones Industrial Average jumped 1.5%, while the Nasdaq composite slipped 0.2%. Both indexes also posted solid gains for the month, finishing with gains of 8.8% and 10.7%, respectively.
The market marched higher in November as investors grew hopeful that the Federal Reserve is finally done raising interest rates, which fight inflation by slowing the economy. The Fed pushed its benchmark interest rate from near zero in 2022 to its highest level in two decades this year.
The rally also was driven largely by the technology sector, where several companies with high values tend to disproportionately impact the market. Microsoft gained 12.1% for the month, while Nvidia rose 14.7%.
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Treasury yields also generally fell, easing pressure on stocks, though the yield on the 10-year Treasury, which influences mortgage rates, rose to 4.34% Thursday from 4.26% the prior day.
Trader Michael Milano, right, works Nov. 1 on the floor of the New York Stock Exchange.
A Commerce Department report Thursday said prices were unchanged from September to October, down from a 0.4% rise the previous month. Compared with a year ago, consumer prices rose 3% in October, below the 3.4% annual rate in September and the lowest year-over-year inflation rate in more than 2½ years.
The Labor Department said Thursday slightly more Americans filed for unemployment benefits last week, but the number of people in the U.S. collecting benefits rose to its highest level in two years. It shows the labor market remains strong but may be softening.
The latest data raised hopes that the Fed will achieve a “soft landing” — cooling inflation without causing a deep recession.
Surprisingly encouraging corporate earnings gave investors more confidence.
Software company Salesforce jumped 9.4% after a strong profit forecast. Cloud-computing company Snowflake rose 7% after an encouraging financial forecast.
On the losing end, data storage company Pure Storage fell 12.2% after a disappointing revenue outlook.
All told, the S&P 500 rose 17.22 points to 4,567.80 Thursday. The Dow jumped 520.47 points to 35,950.89. The Nasdaq composite dropped 32.27 points to 14,226.22.
Oil and gasoline prices in the U.S. fell, relieving pressure on consumers. The price of U.S. crude oil fell 2.4% Thursday.
In Europe, the latest data showed inflation dropped more than expected to 2.4% in November, the lowest in more than two years.
Stocks in Asia and Europe closed mostly higher.
What’s at risk when you take out a small business loan
What’s at risk when you take out a small business loan
If you’re running a small business, you’ll likely need to raise some capital at some point. There are many options for doing so—including borrowing from family or friends, taking out a small business loan from the bank, or relying on your credit cards. But no matter how you scrape together funds, it’s essential to consider how you will pay them back.
Westfield used industry sources and news coverage to compile a list of potential risks in borrowing money to fund a small business. According to a small business report by the Federal Reserve, nearly 3 in 4 firms with paid employees had outstanding debt in 2022. Among businesses with debt, 40% have borrowed $100,000 or more. Companies will have to pay those loans back over time, potentially burdening their business’s revenue.
Those who want to avoid loans or credit card debt may seek investors and offer equity in their business. However, this strategy has its own risks. The more ownership you offer to outside investors, the less control you have over your business strategies.
No matter what type of business funding you decide to pursue, make sure you understand the long-term consequences and risks that come along with it.
Defaulting on a loan
A traditional loan from the bank might seem like the most obvious solution when you’re looking to raise money for your small business. There are a few options here, including a traditional business loan from your banking institution or one backed by the Small Business Administration. SBA loans are typically a bit easier to get approved, as they are backed by the government and pose less risk for lenders.
No matter which loan you take out, defaulting or failing to make payments will have severe consequences. You will lose any collateral you’ve put up, and your business and personal credit scores can take a hit. Most SBA loans require a personal guarantee, meaning your lender can seize your personal assets if you can’t cover the cost.
It’s critical to have a repayment plan before borrowing money and to take only what you need.
Interest increases
An alternative to a small business loan is to pay for business expenses using a personal or business credit card. A credit card can ensure you can pay vendors on time when your cash flow is irregular, as you can pay off your bill later or over time.
That said, credit cards are not a reliable source of significant funds. Most credit cards have very high interest rates that can get out of control if you can’t pay back your debts. The current average business card APR is 22.70%, and because credit card APRs are almost always tied to the prime rate, you could be subject to increases and fluctuations over time.
Not to mention, credit cards don’t come with a set payoff schedule like a loan. You’ll have to be disciplined with monthly payments to avoid burdening yourself with debt for an extended period.
Shifting control
If you’re worried about the implications of borrowing money from a bank or credit card company, you could consider seeking angel or venture capital investing to fund your business. In this case, you’d offer equity in the business in exchange for securing the funds you need to keep it running.
The risk in this method comes if you transfer too much control into the hands of investors. The more equity you trade away, the less control you have over your business. Think carefully about how much sway you are willing to part with and how much you trust the input of the investors you bring on, especially if you offer a majority share.
Relationship fallouts
Finally, borrowing money from friends or family could be an alternative if you either don’t qualify for funding from the bank or worry about paying it back. You could also score a deal on repayment terms and interest with the right lender.
Still, this is very dangerous to personal relationships. A 2022 CreditCards.com survey found that among respondents who lent friends and family money, 59% had a bad experience, including not getting their money back or damaging their relationship. If the relationship is important, consider how borrowing money might change it.
This story originally appeared on Westfield and was produced and distributed in partnership with Stacker Studio.
