US STOCKS-U.S. stocks drop on news of Biden tax proposals

  • Reuters
  • Stock Market News
US STOCKS-U.S. stocks drop on news of Biden tax proposals

* AT&T rises on strong quarterly results

* U.S. weekly jobless claims decline further (Adds market close at 4 p.m.)

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. 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 .DJI and S&P 500 .SPX scaled all-time peaks last week as investors await guidance from Microsoft Corp MSFT.O , Google parent Alphabet Inc GOOGL.O and Facebook Inc FB.O 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?"

Earlier in the session the S&P 500 healthcare sector .SPXHC hit a fresh record high while industrials .SPLRCI were the biggest gainers.

American Airlines Group Inc AAL.O and Southwest Airlines (NYSE: LUV ) Co LUV.N reported smaller-than-expected quarterly losses, signaling a revival in travel demand. Both shares fell. 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. data showed U.S. home sales fell to a seven-month low in March, as an acute property shortage boosted prices and made owning a house more expensive for some first-time buyers. speedy U.S. vaccination rollout has improved the economic outlook as people plan summer vacations and spending on leisure activities, 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 (NYSE: SCHW ).

"What moves markets most of the time is not the actual earnings results but the results versus expectations," he said. "We've had pretty spectacular results overall."

First-quarter earnings are expected to increase 31.9% from a year ago, the highest rate since the fourth-quarter of 2010, according to IBES Refinitiv data.

All 11 S&P 500 sectors closed lower as Microsoft, Apple Inc (NASDAQ: AAPL ), Inc AMZN.O and Tesla Inc TSLA.O weighted the most on the downdraft.

Unofficially, the Dow Jones Industrial Average .DJI fell 0.94%, the S&P 500 .SPX lost 0.92% and the Nasdaq Composite .IXIC dropped 0.94%.

AT&T Inc (NYSE: T ) T.N beat Wall Street revenue targets as the reopening of the U.S. economy following pandemic-linked restrictions boosted smartphone sales and the media business. Intel Corp INTC.O is expected to post a drop in first-quarter revenue later in the day, with analysts looking forward to updates on its U.S. manufacturing plants and chips for automakers amid a global microchip supply shortage.

Biogen Inc BIIB.O beat estimates for quarterly profit 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.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or