Shares drop on Biden plan to raise capital gains tax


U.S. stocks saw their biggest drop in five weeks after President Joe Biden reportedly offered to nearly double the capital gains tax for the rich. The dollar has gone up.

The S&P 500 fell after Bloomberg News reported that for those earning US $ 1 million or more, the new maximum rate, coupled with an existing surtax on investment income, means federal tax rates for wealthy investors could reach 43.4%. Speculation has arisen that some traders may sell stocks before any changes are made to take advantage of the lower rate. Shares hovered throughout the session amid mixed economic data and renewed concern about the worsening pandemic.

All major groups in the S&P 500 fell, led by stocks in materials, energy and technology. AT&T Inc. recovered after exceeding profit estimates. Data showed sales of previously owned U.S. homes slipped in March to a seven-month low, while jobless claims posted an unexpected drop last week.

“The sticker shock on some of these tax figures will be difficult for some investors to overcome,” wrote Edward Moya, senior market analyst at Oanda, in a note. “Some traders are looking for an excuse to lock in their profits and they might choose to use this tax story as a catalyst.”

A gauge of the scale of the market suggests that investor concerns remain. The percentage of Russell 2000 members trading above their 50-day moving average fell below 40 percent, compared to around 80 percent for the large-cap S&P 500, a tiny bit after a record spread, according to data compiled by Bloomberg dates back to 1995. It’s too early to say if this can turn into anything more important, but previous cases have resulted in further pressure on US stocks, wrote Jason Goepfert, founder of Sundial Capital Research, in a note to clients.

Elsewhere, Bitcoin fell for the sixth time in seven days, extending losses after the higher capital gains proposal was revealed. Investors are already subject to capital gains tax if they hold the cryptocurrency for more than a year.

Here are some key events to watch out for this week:

  • The United States released data on new home sales on Friday.

Here are some of the main movements in the markets:

Actions

  • The S&P 500 fell 0.9% at 4 p.m. New York time.
  • The Stoxx Europe 600 index rose 0.7%.
  • The MSCI All-Country World Index fell 0.2 percent.

Currencies

  • The Bloomberg Dollar Spot Index gained 0.2%.
  • The euro fell 0.2% to US $ 1.212.
  • The Japanese yen was little changed at 108.03 to the dollar.

Obligations

  • The yield on 10-year Treasuries fell one basis point to 1.55%.
  • The German 10-year yield climbed one basis point to -0.25%.
  • The UK 10-year yield was unchanged at 0.74%.

Merchandise

  • West Texas Intermediate crude rose 0.5% to US $ 61.65 per barrel.
  • Gold fell 0.5% to US $ 1,783.60 an ounce.


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