Stocks rose Friday, steadying after selling off sharply on Thursday following a report that President Joe Biden was eyeing a proposal to increase the capital gains tax rate on wealthy individuals.
The S&P 500 added more than 1% to reach a record intraday high, after the index dropped 0.9% during the regular trading day for its worst session in five weeks. The blue-chip index ended just short of its record closing high. The Dow and Nasdaq also rose to reverse Thursday's losses following the report, which suggested Biden was considering increasing the capital gains tax rate on those earning more than $1 million to 39.6%. The current base capital gains tax rate is 20%.
"I think the immediate reaction was probably a bit overdone. These proposals come out and you never know, especially with tax proposals, where we'll end up. So it looks like an opening bid. I'm sure there will be intense lobbying from the investment community to adjust those numbers," Kathy Jones, Charles Schwab chief fixed income strategist, told Yahoo Finance on Thursday. "But I think at the moment, when you have very high valuations in the market, anything that is bad news can spark a bit of a sell-off."
Shares of Dow-component Intel (INTC) dropped after the chip-maker posted first-quarter data center revenues that missed expectations. Mattel (MAT) shares jumped after quarterly net sales surged far more than expected and the toy-maker raised its full-year outlook. Snap (SNAP) shares rose as quarterly revenue and daily active users extended 2020's momentum and each sharply exceeded estimates.
Overall this week, stocks have hovered just below record levels as investors sought new equity drivers and more data on corporate earnings results and economic activity.
In another report that appeared to corroborate the pick-up in economic activity, Thursday's initial unemployment claims report showed just 547,000 individuals filed for first-time unemployment benefits last week, marking an unexpected improvement to a new pandemic-era low. Next week's advanced print on first-quarter gross domestic product and quarterly results from mega-cap companies including Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL) and Facebook (FB), are expected to further underscore the latest pick-up in economic activity and corporate profits during the recovery from the pandemic.
"We've spent kind of the entire month of April struggling for direction in the markets. We've had 13 out of the 14 slowest days of the year in April. We're just looking for new catalysts. I think the market has already priced in a lot of the surge in economic growth, in earnings growth," Gabriela Santos, global market strategist for JPMorgan Asset Management, told Yahoo Finance. "And it just feels like we should consolidate, maybe even have a pullback before we continue that trend higher over 6 months and 12 months. So I think this is just part of the market struggling to find direction in the short term."
"Specifically related to capital gains, this should not be a surprise," sh added. "It was a part of President Biden's agenda during the election and it was anticipated as part of the American Families Plan which should be presented next week and will be a discussion for the rest of the year. So [stocks are] just struggling to find direction in what otherwise we still consider to be a favorable backdrop for equities."
4:02 p.m. ET: Stocks end higher, S&P 500 posts fresh intraday high
Here's where the three major indexes ended Friday's session:
S&P 500 (^GSPC): +45.22 points (+1.09%) to 4,180.2
Dow (^DJI): +227.92 points (+0.67%) to 34,043.82
Nasdaq (^IXIC): +198.39 points (+1.44%) to 14,016.81
3:06 p.m. ET: 'We're going to have our own form of Roaring Twenties': Analyst
With economic activity already showing strong signs of picking up, the U.S. is on track for a resurgence akin to the Roaring Twenties after the Spanish Flu, according to Morgan Stanley managing director Kathy Entwistle.
“What we’re looking at is, the economy is opening up, we’re starting to see people put money to work again. We’ve all been locked down for a year, and we’re going to start seeing different things happening in the economy that are very positive. And it’s going to have a big impact on not only our investments but also the spending, which is going to grow investments into companies even further in a different way, whether it’s, you’re buying a stock or you’re buying a product or you’re out spending money on retail – it’s all going to make an impact," Kathy Entwistle, Morgan Stanley managing director, told Yahoo Finance on Friday.
"We talked about what happened after the Spanish Flu, and it was the Roaring Twenties. I think we’re going to have our own form of Roaring Twenties coming up," she added. "It will be a little bit different than 100 years ago, but it will still be something that is very energized, and we’re going to see money being spent.”
2:04 p.m. ET: Stocks extend gains, S&P 500 and Nasdaq add more than 1%
Here's where markets were trading as of 2:04 p.m. ET:
S&P 500 (^GSPC): +47.6 points (+1.15%) to 4,182.58
Dow (^DJI): +225.84 points (+0.67%) to 34,041.74
Nasdaq (^IXIC): +217.21 points (+1.57%) to 14,035.11
Crude (CL=F): +$0.53 (+0.86%) to $61.96 a barrel
Gold (GC=F): -$5.10 (-0.29%) to $1,776.90 per ounce
10-year Treasury (^TNX): +0.5 bps to yield 1.561%
10:00 a.m. ET: New home sales surge to the highest level since 2006 in March
New home sales jumped far more than expected in March to hit the highest level in 15 years, with housing demand still holding up even as mortgage rates began to creep higher this year.
New home sales surged 20.7% in March over February, the Commerce Department said Friday. A monthly rise of 14.2% was expected. The jump brought the seasonally adjusted annualized rate of new home sales to 1.021 million, or the highest level since 2006. A 40.2% monthly jump in new home sales in the South led advances, and sales also increased in the Northeast and Midwest on a month-over-month basis. New home sales in the West dropped by 30% in March over February, however.
In February, new home sales dropped by an upwardly revised 16.2% month-over-month, with harsh winter weather weighing on housing market activity during the period.
9:49 a.m. ET: Output in U.S. manufacturing, service sectors reach record highs in April: IHS Markit
Activity in both the private U.S. services and manufacturing sectors jumped to a record high in April, with the vaccine-enabled broad-based reopening helping fuel growth across the economy.
The U.S. manufacturing sector's preliminary purchasing managers' index for April rose to 60.6, from 59.1 in March, IHS Markit reported Friday. This marked the highest level since the firm began tracking the metric.
The U.S. services sector saw even faster growth, with the PMI rising to 63.1 from 60.4 in March. This was faster than the 61.5 expected, according to Bloomberg data, and also marked a series high.
"The upturn is broad-based: the service sector is growing at the fastest rate recorded in almost 12 years of survey history, and manufacturers reported one of the strongest expansions seen over the past seven years," Chris Williamson, chief business economist for IHS Markit, said in a statement. "The latter was all the more impressive, as factories continued to be throttled by unprecedented supply chain delays, a consequence of which was a further steep rise in prices."
“The worsening supply situation is a concern for the outlook, especially in relation to prices. Supply needs to improve to come into line with demand," he added. "But with record supply chain delays driving a rise in backlogs of uncompleted work of a magnitude not surpassed for over seven years, firms appear to be struggling to boost operating capacity in the near-term.”
9:36 a.m. ET: Bitcoin, other cryptocurrency prices plunge amid capital gains tax jitters
Bitcoin (BTC-USD) prices plunged 11% to below $49,000 on Friday, extending the selloff in other risk assets seen Thursday as concerns over higher capital gains taxes weighed on assets that have experienced rapid price gains.
The largest cryptocurrency by market cap was on track to post its worst weekly performance in nearly two months amid the drawdown, according to data from Bloomberg. Ethereum (ETH-USD), the second largest cryptocurrency, also sank by 14%. Meme-based dogecoin (DOGE-USD), which saw a renascence this week that sent prices up sharply, dropped 19%.
9:30 a.m. ET: Stocks open mixed, Intel drags down Dow while S&P 500 and Nasdaq rise
The three major indexes opened mixed Friday morning, with a drop in shares of Intel pulling the Dow down by 70 points, or 0.2%. The S&P 500 and Nasdaq rose, however, to shake off steep losses from the prior session, sparked by concerns over an increase in the capital gains tax rate for wealthy individuals.
7:05 a.m. ET Friday: Stock futures rise, shaking off Thursday's declines
Here's where markets were trading ahead of the opening bell:
S&P 500 futures (ES=F): 4,138.25, up 10.5 points or 0.25%
Dow futures (YM=F): 33,777.00, up 69 points or 0.2%
Nasdaq futures (NQ=F): 13,780.25, up 30.00 points or 0.22%
Crude (CL=F): +$0.35 (+0.57%) to $61.78 a barrel
Gold (GC=F): +$5.70 (+0.32%) to $1,787.70 per ounce
10-year Treasury (^TNX): -0.5 bps to yield 1.551%
6:02 p.m. ET Thursday: Stock futures edge lower
Here's where markets were trading as the overnight session began.
S&P 500 futures (ES=F): 4,129.75, up 2 points or 0.05%
Dow futures (YM=F): 33,720.00, up 11 points or 0.03%
Nasdaq futures (NQ=F): 13,759.75, up 9.5 points or 0.07%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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