Wall Street Close: Bears look set to snap four-week uptrend on fears of US capital gains tax hike
|- US equities drop for third day in the week, all three benchmarks print losses around 1.0%.
- US President Joe Biden proposes 40% capital gain tax on wealthier Americans.
- Upbeat earnings from Snap, Intel came in near the closing but couldn’t please markets, US data, ECB went largely unnoticed.
Wall Street benchmark returned to red on Thursday as US President Biden’s proposal to back the upcoming "American Families Plan” with an increase in capital gains tax to 40%. Also weighing on the mood could be the ECB’s sustained rejection of the taper tantrum and the coronavirus (COVID-19) conditions in Asia, mainly India and Japan.
Even as Bide faces strong rejection from Republicans over his $2.25 trillion US infrastructure spending proposal, the Democratic leader matches wide market forecasts of inflating taxes for wealthy Americans to fund his next stimulus.
Against this backdrop, Dow Jones Industrial Average (DJI30) and S&P 500 both register the heaviest weekly losses, respectively around 0.94% and 0.92% on a day. Further, Nasdaq 100 also declined 131.84 points, or 0.94% daily, by the end of Thursday’s North American trading session.
While the US equity benchmarks dropped on Thursday, the US 10-year Treasury yields also refreshed the weekly low, before recovering some losses to 1.54% of late.
Other than the fear tax hike, the European Central Bank’s (ECB) cautious optimism and refrain from following the Bank of Canada’s (BOC) path, at least for now, also weighed on the market sentiment. Further, the covid woes in India and Japan join geopolitical fears concerning China, Russia and Iran to exert additional downside pressure on the risk-off mood.
It’s worth mentioning that upbeat prints of US Jobless Claims, Chicago Fed Manufacturing Index and a pullback in Existing Home Sales failed to entertain US traders.
Looking forward, the preliminary activity numbers from the UK and Eurozone, coupled with the ECB President Christine Lagarde’s speech will also be the key to watch. However, risk catalysts are likely to keep the driver’s seat and weigh on the mood unless any positive surprises land on the street.
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