Stocks drop amid concerns over capital gains taxes
By Joe Wallace and Amber Burton
U.S. stocks fell on Thursday on reports that President Biden plans to nearly double capital gains taxes on the rich.
Mr Biden is forecasting a capital gains tax increase of up to 39.6% for the richest Americans, up from the current 20%, Bloomberg News reported on Thursday afternoon.
The major indices hovered between small gains and losses for much of the session before tumbling into the headlines. The S&P 500 fell 38.44 points, or 0.9%, to 4,134.98. The Dow Jones Industrial Average fell 321.41 points, or 0.9%, to 33,815.90. Nasdaq Composite technology slipped 131.81 points, or 0.9%, to 13,818.41.
All 11 sectors of the S&P 500 traded lower on the report. Technology and other growth stocks were among the biggest losers. Shares of Micron Technology, Twitter and Western Digital fell more than 4%.
The planned tax hike is hardly a surprise, but the drop in stocks was a knee-jerk reaction, said Quincy Krosby, chief market strategist at Prudential Financial.
“While this is not a surprise – the hope that capital gains would be taxed at a higher rate – it is becoming more immediate and there is a hitch in the market,” she said. . “This is nothing new. There was no question of whether or when it was just ‘how much? “”
Elsewhere, investors continued to analyze another batch of earnings reports and labor market data. Many investors remain optimistic about the outlook for equities, but are increasingly concerned that a surge in coronavirus cases around the world could delay plans to reopen economic activity. India reported the largest one-day increase in new infections in the world on Thursday.
“It wouldn’t take much news to [investors] to start ripping up their reopening playbook, ”said Christopher Jeffery, head of inflation and rate strategy at Legal & General Investment Management. his team is closely monitoring the increase in Michigan cases.
The earnings season continues at a strong pace.
Equifax shares jumped $ 28.78, or 15%, to $ 221.41 after the credit reporting firm on Wednesday night lifted its financial projections for the year and announced it plans to buy back more than $ 100 million in shares.
Shares of Blackstone Group climbed $ 2.65, or 3.3%, to $ 82.96 after the private equity firm hit a record first-quarter profit of $ 1.75 billion.
Snap and Intel were among the companies to report results after the markets closed.
Snap reported an increase in sales and a narrower quarterly loss as the social media platform gained more users, helping stocks climb nearly 5% after hours.
Conversely, Intel announced a decline in sales and quarterly revenues. Shares of the tech company fell 2% after-hours trading despite increasing its outlook for the year.
Some investors are wary of the results to come later this year. “We’re just going to have to see [what happens] when you take away the stimulus and the cash payments, ”said Kimberly Woody, senior portfolio manager at Globalt Investments. We’re sort of on a high sugar level. ”
Economically, worker filings for unemployment claims hit another Covid-19 low of 547,000 last week. The decline is a sign that the labor market is strengthening.
Jason Borbora-Sheen, multi-asset portfolio manager at Ninety One, said he expects the general stock market to move sideways or decline in the coming months. “Things have gotten pretty overbought,” he said.
One of the two funds managed by Mr. Borbora-Sheen bought put options to protect against downward movements in stocks. Puts are contracts that pay off if the underlying asset falls below a certain price.
In the bond market, the yield on the 10-year US Treasury fell to 1.554% from 1.566% on Wednesday. Yields, which move in the opposite direction to bond prices, fell from a high of 1.749% at the end of March.
Abroad, shares of tech and utility companies led the Stoxx Europe 600 up 0.7%.
Shares of Credit Suisse Group fell 2.1% after the Swiss lender said it would issue new shares after Archegos Capital Management’s losses wiped out a strong first quarter. Renault shares fell 1.3% after the French automaker reported lower first-quarter earnings.
The European Central Bank has left its key interest rates and bond buying programs unchanged, seeking to maintain support for governments and businesses through a new round of coronavirus infections and restrictions.
In Asia, chemical and pharmaceutical stocks helped Japan’s Nikkei 225 climb 2.4%. The Shanghai Composite Index in China fell 0.2%.
(END) Dow Jones News Wire
April 22, 2021 5:15 p.m. ET (9:15 p.m. GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.