Stocks end lower as Biden reportedly to propose capital gains tax boost
Stocks were in a narrow range in morning trading and searching for direction. That direction was found, and it was lower, following news that President Biden is set to propose a plan that could nearly double capital gains taxes on the wealthy. The rise in virus cases globally, notably the surge in India, is continuing to cause some jitters for investors as the possibility of a delay to the expected global recovery rises along with infections.
ECONOMIC EVENTS: In the U.S., jobless claims fell 39,000 to 547,000 in the week ended April 17. The Chicago Fed's National Activity index rose 2.91 points to 1.71 in March. Existing home sales declined 3.7% in March to a 6.01M rate. The leading economic indicators index rose 1.3% to 111.6 in March, which was a little stronger than expectations.
In White House news, Bloomberg reported that President Joe Biden intends to propose to boost the capital gains tax rate to 39.6% for those earning $1M or more, an increase from the current base rate of 20%. When coupled with the 3.8% tax on investment income that funds the Affordable Care Act, federal tax rates for investors could be as high as 43.4%, sources told Bloomberg.
Meanwhile, Reuters reported that U.S. Senate Republicans have proposed a five-year, $568B infrastructure plan in an attempt to counter President Joe Biden's wide-ranging $2.3T proposal. The package, which is lower than an initial GOP target range of $600B-$800B, focuses narrowly on typical infrastructure projects including roads, bridges, rail, ports, water systems, and on broadband access, and it would not result in higher taxes but be fully paid for through user fees and unspent federal funds, according to Reuters.
TOP NEWS: Shares of AT&T (T) rose 4.2% after the company reported better than expected first quarter earnings and revenue. The company, which reported 2.7M total domestic HBO Max and HBO subscriber net adds in Q1, said it "continued to excel in growing customer relationships in our market focus areas of mobility, fiber and HBO Max."
Dow (DOW) shares closed 6% lower despite the fact that the company reported better than expected operating EPS and revenue and said it "entered the second quarter with increasing momentum."
In other earnings news, Chipotle Mexican Grill (CMG) shares fell 1.8% despite the company reporting better than expected first quarter earnings and saying its "off to a great start in 2021."
In M&A news, Hartford (HIG) announced the receipt of two additional unsolicited proposals from Chubb Limited (CB) to acquire the company. Hartford revealed along with its earnings report that Chubb (CB) said it was prepared to offer "in excess of $67 per share" if The Hartford would engage in "meaningful discussion and due diligence." The Hartford then received another letter on April 14, in which Chubb said it was willing to increase its offer to "$70 per Hartford share, the top end of our range," but Hartford's board of directors unanimously rejected both proposals, determining that entering into discussions regarding a strategic transaction "would not be in the best interests of the company and its shareholders." In response, Chubb issued a statement that said in part: "The Hartford has chosen not to engage in response to any of our proposals. The path to a transaction would have been engagement coming from The Hartford on the terms of our last proposal. Although we are disappointed, we want to repeat that our shareholders demand of us, and we demand of ourselves, that we remain a disciplined acquiror."
Meanwhile, Reuters reported that two U.S. Senators, Democrat Gary Peters and Republican John Thune, are working to attach legislation to allow automakers to deploy tens of thousands of self-driving vehicles on U.S. roads to a bipartisan China bill. Publicly traded companies in the space include Tesla (TSLA), General Motors (GM), and Alphabet (GOOGL) with its self-driving unit Waymo.
Additionally, Boeing (BA) was in focus after Reuters reported that the Federal Aviation Administration said that 106 Boeing 737 MAX aircraft have been grounded globally due to an electrical issue and that the planemaker is still working on a fix.
MAJOR MOVERS: Among the noteworthy gainers was Renalytix AI (RNLX), which rose 15.1% after announcing that the U.S. Government has granted the company a 10-year governmentwide acquisition contract to provide KidneyIntelX early-stage kidney disease bioprognostic testing services. Also higher was Teradata (TDC), which gained 26.6% after reporting quarterly results.
Among the notable losers was Danimer Scientific (DNMR), which declined 8% after Spruce Point Capital issued a short report predicting 65% share downside. Also lower was Fisker (FSR), which fell over 9% after Goldman Sachs analyst Mark Delaney downgraded the stock to Sell from Neutral.
INDEXES: The Dow fell 321.41, or 0.94%, to 33,815.90, the Nasdaq lost 131.81, or 0.94%, to 13,818.41, and the S&P 500 declined 38.44, or 0.92%, to 4,134.98.