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Dow Futures Extend Slide On Biden Tax Hike Plans, Bitcoin Below $50,000

Reports that President Joe Biden is planning a major U.S. tax overhaul, including a big hike on investment gains, has stock markets around the world on edge Friday.

The Friday Market Minute

  • Global stocks mixed as reports of President Joe Biden's income and investment tax proposals rattle markets.
  • Biden's plan could hike capital gains rate to 40%, multiple media reports indicate, but narrow majorities in both Houses of Congress suggest the plans will need major changes to get full support. 
  • Bitcoin falls 9.3% to $48,120 in overnight trading as investors worry digital currencies could face stiffer investment taxes, while the dollar slumps 0.3% against its global peers. 
  • Benchmark 10-year note yields hold at 1.552% in overnight trading, the lowest since mid-March. 
  • CDC data shows 89.25 million Americans have now been fully vaccinated against the coronavirus, with around 219 million doses administered as of Thursday.
  • U.S. equity futures suggest a mixed open on Wall Street following earnings from Honeywell, American Express and Schlumberger and April PMI data at 9:45 am Eastern time.

Wall Street futures turned lower Friday, while cryptocurrency prices tumbled and the dollar lagged its global peer as investors reacted to reports of a major shake-up of the U.S. tax code from President Joe Biden that could include major increases on investment income.

Biden's proposal, which could be unveiled as early as next week, is reported to include a doubling of taxes on capital gains for the wealthiest Americans, taking the top rate to just under 40%, with a more modest hike on the marginal tax rate on investment income. Collectively, the changes would raise around $1 trillion and help fund initiatives linked to childcare and early-learning.

Wall Street futures fell sharply when the reports first surfaced yesterday, with the Dow Jones Industrial Average closing down 321 points on the session, but cooler heads look to prevail Friday as investors calculate the chances of such radical measures to pass through both the House and the Senate, where Democrats hold slim majorities over their Republican rivals.

Nonetheless, the spillover implications of wholesale changes to the U.S. tax code, coupled with lingering concerns over stubbornly-high coronavirus infection rates in Asia and South America, has stocks in a cautious mood Friday, with contracts tied to Dow indicating a modest 35 point opening bell decline.

Futures tied to the S&P 500 suggest a 3 point gain while those linked to the Nasdaq Composite are priced for a 22 point move to the upside.

Bitcoin prices, however, remain under significant pressure amid concerns for a hike in capital gains taxes that would eat into some of the enormous profits investors have reaped in the digital currency rally.

Bitcoin was marked 9.3% lower at $48,120.00 each in early Friday trading, down more than 24% from the all-time high it reached earlier this month. Coinbase Global  (COIN) - Get Coinbase Global Inc Report shares, meanwhile, slumped 3.9% lower in pre-market trading to $282.00 each.

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Intel Corp.  (INTC) - Get Intel Corporation Report was another notable pre-market mover, falling 2.8% to $60.82 each after the chipmaker reported stronger-than-expected first quarter earnings last night of $1.39 per share on revenues of $18.6 billion, but noted that investment spending would eat into its current quarter profits. 

Away from stocks, benchmark 10-year Treasury note yields held at 1.552% in overnight trading while the U.S. dollar index, which tracks the greeback against a basket of its major global peers, fell 0.32% to 91.038.

In Europe, stocks are on pace for their first weekly decline in two months despite a much stronger-than-expected reading of economic activity for the month of April, which included a manufacturing PMI reading of 63.3 -- the highest since 1997 -- as factories rebounded from last year's coronavirus shutdown. 

The Stoxx 600 was marked 0.25% lower in early trading in Frankfurt, paced by a 0.4% slump for the trade-sensitive DAX performance index in Germany.

In Asia, news of fresh emergency measures in Tokyo aimed at curbing the recent rise in coronavirus infections, just a few months out for the start of the Olympic Games, held down gains for the Nikkei 225, which closed 0.57% lower at 29,020.63 points

Oil prices were little-changed from last night's close, however, with traders still fighting to find market direction amid a series of conflicting signals on output increase from OPEC, demand growth from Asia and a fluctuating U.S. dollar.

WTI crude for June delivering was marked 2 cents lower at $61.43 per barrel while Brent contracts for the same month fell another 6 cents to $65.36 per barrel.