Dow rebounds 200 points, led by banking and technology as the market shrugs off higher tax fears
US stocks rebounded on Friday as Wall Street reevaluated concerns over news that the White House may seek capital gains tax hikes.
The Dow Jones Industrial Average gained 200 points on a dip in Goldman Sachs and Apple stocks. The S&P 500 rose 1%, led by financial and technology stocks, while the tech-heavy Nasdaq Composite rose 1.2%.
Wall Street had a tumultuous meeting for stocks after several news outlets reported Thursday afternoon that President Joe Biden is expected to propose much higher capital gains taxes for the rich.
Bloomberg News reported that Biden plans to increase capital gains tax up to 43.4% for wealthy Americans.
The proposal would increase the capital gains rate for those making $ 1 million or more from the current 20% to 39.6%, Bloomberg News said, citing people familiar with the matter. Reuters and the New York Times later also reported similar stories.
“We expect Congress to pass a scaled-down version of this tax hike,” Goldman Sachs economists wrote in a note. “We expect Congress to agree on a more modest increase, possibly 28%.”
The three main averages are still on track for modest losses for the week. The Dow and S&P 500 are down 0.6% and 0.3% respectively this week, while the Nasdaq is down 0.5%.
Intel stock fell more than 5% after it released an earnings forecast in the second quarter that fell below analysts’ hopes. American Express fell over 4% after the credit card company reported quarterly revenue that fell slightly short of forecast.
Snap shares rose 9% after seeing accelerated sales growth and strong user numbers in the first quarter. Snap broke even on balance, generating $ 770 million in revenue.
Companies so far have largely managed to beat Wall Street’s predictions for the earnings season. Even so, strong first quarter results have been met with a tepid reaction from investors who have not yet bought shares in companies with some of the best performing.
Strategists say that already high ratings and near record highs for the S&P 500 and Dow have kept traders’ excitement in check. But even after Thursday’s losses, the indices are within 1.5% of their all-time high.
Bitcoin fell overnight, possibly due in part to concerns about higher capital gains taxes, with the cryptocurrency recently declining about 8%, according to CoinMetrics. Other cryptocurrencies like Ethereum have also been hit. So far, the sell-off there has not been carried over to other risk-weighted assets such as stocks.
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