Yesterday, a quite promising early stock market rally got derailed on news stories–based on anonymous sources–that the Biden administration would propose tax increases on wealthy Americans and corporations. The speculation points to an increase in the top income tax rate to 39.6% from the current 37%, to an increase in the capital gains rate for taxpayers with incomes of $1 million or more to 39.6% from the current 20%, and an increase in the top corporate tax rate to 28% from the current 21%.
As you might expect Wall Street wasn’t amused. And pushed back in its time-honored fashion by selling off and reveling in stories about how much selling would go on as investors and traders looked to get their profits in before the still to be officially proposed tax increases took effect.
Today, April 23, markets remembered that there was still money to be made in the near term–whatever the longer term tax picture might be.
The Standard & Poor’s 500 closed up 1.09% and the Dow Jones Industrial Average added 0.67%. The NASDAQ Composite tacked on an impressive 1.44% and the NASDAQ 100 finished higher by 1.26%. The small cap Russell 2000 rose by 1.76% on the day. The iShares MSCI Emerging Markets ETF (EEM) pushed higher by 1.45%.
The “fear index” fell with the CBOE S&P 500 Volatility Index (VIX) falling 7.38% to 17.37 as traders and investors decided there was less need to hedge risk.
The BIG TECH stocks due to report earnings next week all gained today. Alphabet (GOOG) and Microsoft (MSFT), scheduled to report on Tuesday, April 27, gained 2.09% and 1.55%, respectively. Apple (AAPL) and Facebook (FB), set to report on Wednesday, April 28, rose 1.80% and 1.55%, respectively. Amazon (AMZN), listed to report on April 29, climbed 0.96%.