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

Thu 22nd April, 2021 9:01pm
* 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.
 urn:newsml:reuters.com:*:nL1N2MF29C
    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  .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
Co  LUV.N  reported smaller-than-expected quarterly losses,
signaling a revival in travel demand. Both shares
fell. urn:newsml:reuters.com:*:nL4N2MF2RH  urn:newsml:reuters.com:*:nL4N2MF1T8         
    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.  urn:newsml:reuters.com:*:nL1N2ME282
    Separately, 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.  urn:newsml:reuters.com:*:nL1N2ME1YW
    The 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. 
    "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,
Amazon.com 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  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.
 urn:newsml:reuters.com:*:nL4N2MF2MT
    Chipmaker 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.
 urn:newsml:reuters.com:*:nL4N2MF2SE
    

 (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)
 ((herb.lash@thomsonreuters.com; 1-646-223-6019; Reuters
Messaging: herb.lash.reuters.com@reuters.net))
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