Stocks finished sharply lower Thursday following a report that said President Joe Biden would propose a capital-gains tax of more than 40% for the wealthy.
The Dow Jones Industrial Average finished down 321 points, or 0.94%, to 33,815, the S&P 500 dropped 0.92% and the Nasdaq declined 0.94%.
Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6%, and when coupled with a current surtax on investment income, that means federal tax rates for investors could be as high as 43.4%, Bloomberg reported, citing people familiar with the proposal.
The president's plan would lift the capital gains rate to 39.6% for those earning $1 million or more, an increase from the current base rate of 20%, the people told Bloomberg.
Louis Navellier, chief investment officer at Navellier & Associates, said he expected the president's plan to increase the capital gain tax rate to 39.6% to fail.
"A more modest proposal to raise long-term capital gains and qualified dividend tax rates from 20% to 28% would be much more likely to pass the Senate," Navellier said.
Stocks had traded mixed for most of Thursday's session after jobless claims fell to a pandemic low but concern about a resurgence in coronavirus cases persisted.
The number of Americans applying for first-time unemployment benefits fell by 39,000 to 547,000 in the latest week, a sign the labor market has been strengthening. Economists had predicted 610,000 claims.
"This week’s unemployment insurance claims report highlights further labor market improvement," said Indeed Hiring Lab economist AnnElizabeth Konkel.
Sales of previously owned homes slowed in March to a seasonally adjusted annual pace of 6.01 million, a seven-month low.
In corporate news, AT&T (T) - Get Report posted first-quarter adjusted earnings and revenue that topped Wall Street forecasts as the company's HBO Max streaming service added more subscribers and wireless additions trounced estimates. The shares finished 4.2% at $31.36.
American Airlines (AAL) - Get Report reported a modestly wider-than-expected first-quarter loss but noted that improved booking trends will support liquidity as carriers look to exit the travel-related impact of the pandemic. The stock fell 4.5% to $20.07.
Stocks finished higher Wednesday, snapping a two-day losing streak. The Nasdaq posted a sharp 1.19% gain, shaking off a tumble in Netflix (NFLX) - Get Report following a subscribers miss for the streaming giant.
Roughly 80 companies in the S&P 500 have reported or are scheduled to post earnings this week. So far, 85% of the companies that issued reports have topped Wall Street estimates, according to FactSet.
Wall Street analysts expect an increase in earnings of more than 24% for companies in the S&P 500 during the first-quarter season.
As for the pandemic, COVID-19 infections have been increasing in major economies such as Brazil and India.
According to a report in The New York Times, India recorded 312,731 new infections in a 24-hour period, the highest daily coronavirus case count in a single country since the pandemic began more than a year ago.