Shares ended significantly lower Thursday after reports that President Joe Biden would propose a capital gains tax of more than 40% on the rich. The Dow Jones Industrial Average closed at 33,815 points, up 321 points or 0.94%, the S&P 500 down 0.92% and the Nasdaq down 0.94%. Biden will propose almost doubling the capital gains tax for high net worth individuals to 39.6%. Coupled with a recent additional tax on capital gains, that means federal tax rates could rise to 43.4% for investors, Bloomberg reported, citing people familiar with the proposal.
The president’s plan would raise capital gains tax to 39.6% for those earning $ 1 million or more, an increase from the current base rate of 20%, People told Bloomberg. Louis Navellier, chief investment officer at Navellier & Associates, said he expected the president’s plan to raise capital gains tax to 39.6% will fail.
“A more humble proposal to increase the long-term tax on capital gains and qualified dividends from 20% to 28% would have a much better chance of passing the Senate,” said Navellier. Stocks traded mixed for most of Thursday’s session after unemployment claims fell to a pandemic low, but concerns over a resurgence in coronavirus cases remained.
The number of Americans applying for unemployment benefits for the first time has fallen 39,000 in the past week to 547,000, a sign that the job market is strengthening. Economists had predicted 610,000 applications. “This week’s unemployment benefit report shows further improvement in the labor market,” said AnnElizabeth Konkel, an economist at Hiring Lab.
Rival Southwest Airlines Co. earned $ 116 million in the most recent quarter, augmented by $ 1 billion in federal funds that offset labor costs. The company predicts its cash use will slow to $ 2-4 million a day in April as more Americans get vaccinated and travel.
Building contractor DR Horton Inc. reported that quarterly earnings nearly doubled year over year as low mortgage rates and increased demand for housing in the socially distant suburbs boosted sales in the face of the pandemic. Meanwhile, device maker Whirlpool has raised its full-year forecast as demand for housing remains strong. In commodities, West Texas Intermediate crude rose 8 cents to $ 61.43 an ounce and gold fell $ 11.10 to $ 1,781.20 an ounce.
The European markets recovered across the board, with the British FTSE 100 gaining 0.62%, the German DAX 30 gaining 0.82% and the French CAC 40 gaining 0.91%. In Asia, the Chinese Shanghai Composite Index fell 0.23%, while the Hang Seng Index in Hong Kong and the Japanese Nikkei 225 rose 0.47% and 2.38%, respectively.