Stocks End Week Little Changed as Strong Data Offset Tax Plan Fears

Stocks rise Friday and finish the week little changed as investors look to strong economic data and discount a report saying President Biden will propose raising taxes on wealthy investors.
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Stocks ended higher Friday to finish the week little changed as investors looked to strong economic data and discounted a report that said President Joe Biden would propose raising taxes on wealthy investors.

Equities received a boost from data that indicated U.S. business output expanded the most on record in April, according to IHS Markit. New homes sales in the U.S., meanwhile, rebounded in March to the highest levels since 2006.

The Dow Jones Industrial Average ended up 228 points, or 0.7%, at 34,043. The S&P 500 rose 45.19, or 1.1%, to 4,180.70, missing a weekly gain by less than 6 points. The S&P 500 snapped a four-week win streak. The Nasdaq finished up 1.44% at 14,06.81.

Intel  (INTC) - Get Report fell 5.32% Friday after the biggest chipmaker said first-quarter revenue at its Data Center Group fell more than 20% from a year earlier and gross margins slumped.

Snap  (SNAP) - Get Report jumped 7.5% after the social media company posted strong user growth.

A report from Bloomberg Thursday said the Biden administration was considering almost doubling the tax on capital gains to 39.6% for those earning more than $1 million a year. When including a surtax to help pay for Obamacare, the top federal tax rate for wealthy investors could be as high as 43.4%.

Collectively, the changes would raise around $1 trillion and help fund initiatives linked to childcare and early-learning.

"Higher capital gains tax is not my biggest worry right now, largely because a doubling of capital gains tax is unlikely to come to fruition due to the political realities we face," said David Bahnsen, chief investment officer of the Bahnsen Group in Newport Beach, Calif. 

But Bahnsen did say that higher taxes was a threat to economic growth and since "we've seen well over a decade of sub-trendline economic growth" ... "now is no time to be raising taxes." 

Jim Cramer: If the Capital Gains Taxman Cometh, Be Ready for Anything

Stocks fell sharply Thursday following the Bloomberg report. Equities had traded mixed for most of Thursday's session following better-than-expected corporate profits and jobless claims that fell to a pandemic low, but also a renewed surge in coronavirus infections.

Biden's tax proposal is just the latest consideration for investors as they navigate through a market weighing signs of recovery in the U.S. but also worries that virus flare-ups could derail the economy's comeback.

In corporate news, American Express  (AXP) - Get Report posted stronger-than-expected first-quarter earnings following a release of loan loss reserves, but revenue fell amid a slowdown in consumer credit spending.

Honeywell International  (HON) - Get Report posted stronger-than-expected first-quarter earnings and raised its full-year profit guidance, thanks in part to a surge in safety and productivity sales.

Honeywell is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells HON? Learn more now.

Bitcoin traded below $50,000 for a time, but trimmed losses later Friday to change hands at about $51,000.