Stocks open flat, head for losing week on higher tax fears

Stocks open flat, head for losing week on higher tax fears

Futures contracts tied to the major U.S. stock indexes were slightly higher Friday morning as investors prepared to end a down week for equities amid concerns the White House could seek a hike to the capital gains tax.

S&P 500 futures rose 0.1%, while Nasdaq 100 futures gained 0.2%.Contracts tied to the Dow Jones Industrial average turned 30 points lower amid a decline in American Express and Intel shares.

Though Intel’s revenues and earnings were better than what Wall Street had been expecting, it issued second-quarter earnings guidance below analysts’ hopes. Intel shares were down 2.8% in premarket trading.

American Express shares fell 3.7% after the credit card company reported quarterly revenue that was slightly short of forecasts. 

The slight rebound in futures followed a turbulent session for equities after multiple news outlets reported Thursday afternoon that President Joe Biden is slated to propose much higher capital gains taxes for the rich.

Bloomberg News reported that Biden is planning a capital gains tax hike to as high as 43.4% for wealthy Americans.

The proposal would hike the capital gains rate to 39.6% for those earning $1 million or more, up from 20% currently, according to Bloomberg News, citing people familiar with the matter. Reuters and the New York Times later also reported similar stories.

“We expect Congress will pass a scaled back version of this tax increase,” wrote Goldman Sachs economists in a note. “We expect Congress will settle on a more modest increase, potentially around 28%.”

Week to date, the S&P 500, Dow and Nasdaq are down 1.2%, 1.1% and 1.6%, respectively.

Snap shares, meanwhile, added 5% in premarket trading after it said it saw accelerating revenue growth and strong user numbers during the first quarter. Snap broke even on the bottom line while posting revenue of $770 million.

Corporations have for the most part managed to beat Wall Street’s forecasts thus far into earnings season. Still, strong first-quarter results have been met with a more tepid response from investors, who have not, to date, snapped up shares of companies with some of the best results.

Strategists say already-high valuations and near-record-high levels on the S&P 500 and Dow have kept traders’ enthusiasm in check. But indexes are within 1.5% of their all-time highs even after Thursday’s losses.

The Labor Department said Thursday morning that first-time claims for unemployment insurance totaled 547,000, which was below the Dow Jones estimate of 603,000.

Bitcoin plunged overnight, perhaps in part because of concerns about higher capital gains taxes, with the cryptocurrency last down about 8%, according to CoinMetrics. Other cryptocurrencies like Ethereum were also getting hit. So far, the sell-off there was not spilling over into other risk assets like equities.

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