U.S. stocks drop on news of Biden tax proposals

Reuters2021-04-23
  • AT&T rises on strong quarterly results
  • U.S. weekly jobless claims decline further
  • Indexes down: Dow 0.94%, S&P 500 0.92%, Nasdaq 0.94%

By Herbert Lash

NEW YORK, April 22 (Reuters) - U.S. stocks dived on Thursday on reports President Joe Biden planned to almost double the capital gains tax, news analysts said provided an excuse to take profits in a directionless market ahead of big tech's earnings next week.

The three main indexes on Wall Street also fell on reports that Biden planned to raise income taxes on the wealthy, a proposal some said would be hard to pass in Congress.

"If it had a chance of passing, we'd be down 2,000 points," said Thomas Hayes, chairman and managing member at hedge fund Great Hill Capital LLC.

Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago, said when a proposal is floated about raising taxes or capital gains, everybody gets excited, sells first and asks questions later.

"It is more of a short-term, knee-jerk reaction," he said.

Biden will propose raising the marginal income tax rate to 39.6% from 37% and nearly double capital gains taxes to 39.6% for people earning more than $1 million, sources told Reuters.

The proposal targets about $1 trillion for child care, universal pre-kindergarten education and paid leave for workers, the sources said.

Markets have been listless after the Dow and S&P 500 scaled all-time peaks last week as investors await guidance from Microsoft Corp , Google parent Alphabet Inc and Facebook Inc when they report earnings next week.

"Until we get out of this information vacuum the market is going to be generally directionless," he said. "All that really matters moving forward is what are those big tech earnings next week?"

During the session, the S&P 500 healthcare sector hit a fresh record high while industrials were the biggest gainers.

American Airlines Group Inc and Southwest Airlines Co reported smaller-than-expected quarterly losses, signaling a revival in travel demand. Both shares fell.

Investors welcomed data showing the number of Americans filing new claims for unemployment benefits last week dropped to a fresh one-year low. The Labor Department report suggested layoffs were subsiding and expectations were rising for another month of blockbuster job growth in April.

The speedy U.S. vaccination rollout has improved the economic outlook as people plan summer vacations and leisure spending, but a surge in COVID-19 cases in India and elsewhere in Asia has kept investors anxious, Hayes said.

Equities have likely reached a near-term top as expectations are too high, said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

"There's going to be continued positive moves throughout the remainder of the year but we are due for some sort of a pullback in the very short term," he said. "Then the dip buyers will step back in."

First-quarter earnings are expected to increase 31.9% from a year ago, the highest rate since the fourth quarter, according to IBES Refinitiv data.

All 11 S&P 500 sectors closed lower as Microsoft, Apple Inc , Amazon.com Inc and Tesla Inc weighted the most on the downdraft.

The Dow Jones Industrial Average fell 0.94% to 33,815.9, the S&P 500 lost 0.92% at 4,134.98, and the Nasdaq Composite dropped 0.94% to 13,818.41.

Volume on U.S. exchanges was 10.35 billion shares, compared with the 10.32 billion full-session average over the last 20 trading days.

Chipmaker Intel Corp forecast second-quarter revenue above Wall Street targets, betting its next generation of processors for data centers and PCs will meet growing demand for cloud-based services. Shares slipped about 1% in after-hours trade.

AT&T Inc beat Wall Street revenue targets as the U.S. economic reopening following pandemic-linked restrictions boosted smartphone sales and the media business. AT&T shares rose 4.2%.

Biogen Inc beat quarterly profit estimates on stronger-than-expected sales for its muscle wasting disorder drug, though concerns over its reliance on its yet-to-be approved Alzheimer's therapy, aducanumab, weighed on shares. Biogen shares fell 4.0%.

Declining issues outnumbered advancing ones on the NYSE by a 1.57-to-1 ratio; on Nasdaq, a 1.04-to-1 ratio favored decliners.

The S&P 500 posted 84 new 52-week highs and no new lows; the Nasdaq Composite recorded 86 new highs and 20 new lows. (Reporting by Herbert Lash, additional reporting by Lewis Krauskopf in New York, Shivani Kumaresan and Shreyashi Sanyal in Bengaluru; Editing by Anil D'Silva and Richard Chang)

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Comments

  • sleepy90
    2021-04-27
    sleepy90
    Comment
  • __终结__
    2021-04-27
    __终结__
    You know you love me, I know you careJust shout whenever and I'll be thereYou want my love, you want my heartAnd we will never, ever, ever be apartAre we an item? Girl, quit playingWe're just friends, what are you saying?Said "There's another," and looked right in my eyesMy first love broke my heart for the first time, and I was like
  • Juliantotans
    2021-04-26
    Juliantotans
    What happen
  • Lynny
    2021-04-24
    Lynny
    This is a problem of the wealthy. The proposal affects those whose income are above $1m and the tax is imposed on capital gains.So it means you only get taxed if you have profits.It’s likely posturing in relation to the large percentage hike and unlikely to pass Congress. But as usual people are panicking and selling.So where will they park all their stock gains I wonder? In the bank for a measly 1% interest plus inflation ...
  • HongZ
    2021-04-23
    HongZ
    Ok
  • TestWater
    2021-04-23
    TestWater
    Good for the stock listed in US market but business outside of US... 
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