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Market Snapshot

https://www.briefing.com/stock-market-update

Dow 33815.90 -321.41 (-0.94%)
Nasdaq 13818.43 -131.81 (-0.94%)
SP 500 4134.98 -38.44 (-0.92%)
10-yr Note +1/32 1.556
NYSE Adv 1276 Dec 1971 Vol 866.1 mln
Nasdaq Adv 2010 Dec 2052 Vol 4.4 bln

Industry Watch
Strong: Real Estate
Weak: Information Technology, Consumer Discretionary, Materials, Energy, Financials

Moving the Market

-- Reports indicated that President Biden will propose increasing the capital gains tax rate to as high as 43.4% on Americans earning more than $1 million

-- Convenient excuse to do some selling

-- Q1 earnings generally exceeded expectations, weekly jobless claims declined to post-pandemic low

Market runs into tax trouble
22-Apr-21 16:20 ET
Dow -321.41 at 33815.90, Nasdaq -131.81 at 13818.43, S&P -38.44 at 4134.98

[BRIEFING.COM] The S&P 500 declined 0.9% on Thursday, ostensibly due to reports that President Biden will propose increasing the capital gains tax rate for wealthy Americans. The Nasdaq Composite (-0.9%) and Dow Jones Industrial Average (-0.9%) declined in-line with the benchmark index. The Russell 2000 declined just 0.3%.

Specifically, the S&P 500 went from a 0.2% gain to a 1.2% decline in about an hour after Bloomberg reported that the tax plan would boost the capital gains rate to 39.6% from 20.0% for those earning $1 million or more. The rate would be bumped to 43.4% when including the 3.8% tax on investment income that funds the Affordable Care Act. It would be even higher when including state taxes.

It was interesting to see a visceral reaction in the market considering The New York Times published a similar report earlier in the day and that the president campaigned on raising taxes on the wealthy. The one caveat, to be fair, was that the Bloomberg report indicated the ACA-tax would remain in place while the NYT report did not make that clear.

Nevertheless, the tax news was viewed as a convenient excuse to take profits from a market that had been resilient to selling pressure. Every sector in the S&P 500 closed in negative territory, led lower by the materials (-1.8%), energy (-1.4%), information technology (-1.2%), and consumer discretionary (-1.2%) sectors with losses over 1.0%.

Earnings reports continued to come in mostly better than expected, but many stocks had disappointing reactions, including Lam Research (LRCX 614.54, -26.71, -4.2%) and Dow Inc. (DOW 60.93, -3.89, -6.0%). Union Pacific (UNP 217.98, -5.45, -2.4%) had an appropriate reaction after missing top and bottom-line estimates.

AT&T (T 31.36, +1.25, +4.2%) and Equifax (EFX 221.41, +28.78, +14.9%), on the other hand, were some of the more notable earnings winners, with EFX rising 15%.

In other developments, weekly initial claims fell to a new post-pandemic low at 547,000 (Briefing.com consensus 600,000), existing home sales decreased 3.7% m/m in March to a seasonally adjusted annual rate of 6.01 million (Briefing.com consensus 6.15 million) amid historically low supply, and the ECB kept interest rates/asset purchases unchanged.

U.S. Treasuries finished little changed in a relatively muted session. The 2-yr yield was unchanged at 0.14%, and the 10-yr yield decreased one basis point to 1.55%. The U.S. Dollar Index increased 0.1% to 91.26. WTI crude futures increased 0.2%, or $0.10, to $61.45/bbl.

Reviewing Thursday's economic data:

Initial jobless claims for the week ending April 17 decreased by 39,000 to 547,000 (Briefing.com consensus 600,000). That is the lowest initial claims have been since the week of March 14, 2020. Continuing claims for the week ending April 10 decreased by 34,000 to 3.674 million. That is the lowest continuing claims have been since the week of March 21, 2020.
The key takeaway from the report is that the absolute level of claims is still high, yet there are clear signs of relative improvement that continue to support favorable recovery-minded views for the labor market and the economy.
Existing home sales decreased 3.7% m/m in March to a seasonally adjusted annual rate of 6.01 million (Briefing.com consensus 6.15 million) from an upwardly revised 6.24 million (from 6.22 million) in February. Total sales in March were up 12.3% from a year ago.
The key takeaway from the report is the same as last month: the supply of existing homes for sale remains near all-time low levels. That is driving up the pace of price increases well beyond the pace of income gains, which is going to create affordability pressures for prospective buyers along with rising mortgage rates.
The Conference Board's Leading Economic Index (LEI) increased 1.3% m/m in March (Briefing.com consensus 0.6%) following a downwardly revised 0.1% decline (from +0.2%) in February. That revision marked the end of a string of nine consecutive months of increases for the LEI.
The key takeaway from the report is the recognition that all ten components made positive contributions, which is a testament to the recovery/reopening momentum that is being aided by increasing vaccine adoption rates.

Looking ahead, investors will receive New Home Sales for March and the preliminary IHS Markit Manufacturing and Services PMIs for April on Friday.

Russell 2000 +13.1% YTD
Dow Jones Industrial Average +10.5% YTD
S&P 500 +10.1% YTD
Nasdaq Composite +7.2% YTD

Crude futures settle higher despite market weakness
22-Apr-21 15:25 ET
Dow -359.60 at 33777.71, Nasdaq -150.14 at 13800.10, S&P -42.78 at 4130.64

[BRIEFING.COM] The S&P 500 is down 1.0%, while the Russell 2000 trades higher by 0.1%.

One last look at the sector standings shows red across the board. The heavily-weighted information technology (-1.3%) and consumer discretionary (-1.3%) sectors are among the weakest performers with 1.3% declines. The Philadelphia Semiconductor Index is down 2.4%. The real estate sector is down just 0.3%.

WTI crude futures settled higher by 0.2%, or $0.10, to $61.45/bbl.