Wall St falls on capital tax increase angst; dollar rises

Reuters NEW YORK | Updated on April 23, 2021

Dow Jones Average falls 321.41 points to 33,815, S&P 500 slips to 4,134.98 and Nasdaq Composite drops to 13,818

An index of stocks across the world fell on Thursday weighed by Wall Street after reports that the Biden administration will propose a sharp increase to capital gains tax, while the dollar index rose as the euro and pound gave back recent gains.

Oil prices rose as concerns over Libyan output more than offset worries that rising coronavirus cases in India and Japan would cause energy demand to decline.

On Wall Street, indexes ended lower after reports that the Biden administration is seeking to raise the capitals gains tax to near 40 per cent for wealthy individuals, almost double the current rate.

The proposal would need congressional approval, and analysts expected it to be watered down as it makes its way through Congress.

"If they’re going to tax people more and their net is going to fall, the value of that instrument is lower. Incentives matter," said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

"A lot of money that's in the market at this point is nontaxable, and I don't think people do that calculation. Whenever they see news (like this), they just sell, they want to take the gains this year."

The Dow Jones Industrial Average fell 321.41 points,or 0.94 per cent, to 33,815.9, the S&P 500 lost 38.44 points, or0.92 per cent, to 4,134.98 and the Nasdaq Composite dropped131.81 points, or 0.94 per cent, to 13,818.41. MSCI's gauge of stocks across the globe shed0.23 per cent and the pan-European STOXX 600 index rose 0.68 per cent.Emerging market stocks rose 0.34 per cent.

MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.4 per cent higher, while Japan's Topixrose 1.82 per cent. Nikkei futures were little changed.

Treasury yields fell alongside stocks on the capital gains tax issue.

Benchmark 10-year notes last rose 7/32 in price to yield 1.5416 per cent, from 1.564 per cent late on Wednesday, remaining in atight range so far this week.

Oil prices ended higher as lower output in Libya more than offset concern over demand from India, the third-largest global consumer, where a second wave of coronavirus infections has overwhelmed hospitals.

US crude rose 0.52 per cent to $61.67 per barrel and Brent was at $65.60, up 0.43 per cent on the day.

In currency markets, the dollar rose as the pound gave back some of its recent sharp gains while the euro was weighed by an ECB statement that was hopeful on the economic recovery but lacking in details about the stimulus removal.

US Federal Reserve and Bank of Japan meetings follow next week.

The dollar index rose 0.178 per cent, with the euro down 0.15 per cent to $1.2015.

The Japanese yen strengthened 0.10 per cent versus the greenback at107.96 per dollar, while Sterling was last trading at$1.3841, down 0.63 per cent on the day.

The Russian ruble rose against the dollar after Moscow signaled an end to military drills near the Ukraine border,easing some of the geopolitical risk premium.

The ruble strengthened 1.78 per cent versus the greenback at 75.29per dollar.

Turkish markets suffered under the weight of expectations that US President Joe Biden will formally recognize the massacre of Armenians by the Ottoman Empire during World War Oneas an act of genocide.

The lira lost 1.64 per cent versus the US dollar at 8.31.

Spot gold dropped 0.6 per cent to $1,783.68 an ounce. Silver fell 1.71 per cent to $26.12.

Published on April 23, 2021

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