Name: Dow closes more than 300 points lower following reports of Biden eyeing capital gains tax hike
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Dow closes more than 300 points lower following reports of Biden eyeing capital gains tax hike

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Wall Street set for a flat open after Wednesday's gainsU.S stocks reversed lower in a swift fashion on Thursday after reports that President Joe Biden is slated to propose much higher capital gains taxes for the rich.The Dow Jones Industrial Average dropped 321.41 points, or 1%, to 33,815.90. At its low of the day, the blue-chip benchmark fell 420 points. The S&amp;P 500 erased earlier gains and closed 0.9% lower at 4,134.98, while the Nasdaq Composite slid 0.9% to 13,818.41.7 hours agoBloomberg News reported Thursday afternoon that Biden is planning a capital gains tax hike to as high as 43.4% for wealthy Americans. The proposal would hike the capital gains rate to 39.6% for&nbsp;those earning $1 million or more, up from 20% currently, according to Bloomberg News, citing people familiar with the matter. Reuters and the New York Times later matched the headlines."Biden's proposal effectively doubles the capital gains tax rate on $1 million income earners," said&nbsp;Jack Ablin, Cresset Capital Management's founding partner and CIO. "That's a sizable cost increase to long-term investors.&nbsp;Expect selling this year if investors sense the proposal has a chance of becoming law next year."Growth stocks, which could come under selling pressure on higher capital gains taxes, led the intraday decline on Thursday with shares of Tesla&nbsp;and Amazon falling 3.3% and 1.6% respectively. The iShares S&amp;P 500 Growth ETF fell 1%, more than its value counterpart."Markets are highly concentrated in a small number of growth names," said Mark Yusko, CEO &amp; CIO of Morgan Creek Capital Management. "Those stocks have driven most of the gains over the past few years and many investors have significant gains at current prices. Fear of higher capital gains rate could motivate selling of those names and trigger market correction, so some investors will try and front run that potential move by selling or hedging through short selling."Before the news hit, major averages were trading slightly higher as investors sifted through corporate earnings and economic data.Shares of Southwest Airlines rolled over and fell 1.6% despite the carrier&nbsp;saying leisure travel bookings continue to rise and that it expects to Southwest also posted a narrower-than-expected loss for the first quarter.Dow Inc. slumped 6% even after the chemicals company topped earnings and revenue estimates for the first quarter. The stock is still up almost 10% for 2021.So far, companies have largely topped Wall Street expectations this earnings season, but strong first-quarter results are not lifting the market higher after a run to records pushed valuations near multiyear highs."The streak of strong positive EPS surprises is likely to continue, but elevated valuations have now become pervasive; sentiment is too optimistic; and a potential change in corporate taxation is an overhang," Maneesh Deshpande, head of equity derivatives strategy at Barclays, said in a note.Nonetheless, the firm raised its year-end S&amp;P 500 target to 4,400, which would translate into a 6% gain from here. Barclays cautioned that upside beyond its target is unlikely.Investors also digested a better-than-expected reading on weekly jobless claims. The Labor Department said Thursday that first-time claims for unemployment insurance which was below the Dow Jones estimate for 603,000.Also on Thursday, the Republican party set forth its counteroffer to Biden's $2 trillion infrastructure plan. The senators proposed a $568 billion framework that includes funding for bridges, airports, roads and water storage. It does not include tax increases.Still, the fears on the capital gains tax increase could be overblown as Democrats hold only narrow majorities in both the Senate and House, which could make it hard to approve any aggressive proposal."I think these are also trial balloons and sort of laying the stake out for future negotiations. If I want to get something done, the first thing I'm going to do is come with a really extreme request and then I'm going to negotiate back from that. That's just the way politics work," Doug Sandler, head of global strategy at&nbsp;RiverFront Investment Group, said on CNBC's "Power Lunch."&nbsp;"I'm not going to guess we're going to double the capital gains tax because that narrow majority in Congress, that seems too controversial to get passed, but it starts the framework that taxes are going higher," Sandler added.— CNBC's Maggie Fitzgerald and Kevin Stankiewicz&nbsp;contributed reporting.Become a smarter investor with&nbsp;CNBC Pro.&nbsp;Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.&nbsp;Sign up to start a&nbsp;

Wall Street set for a flat open after Wednesday's gainsU.S stocks reversed lower in a swift fashion on Thursday after reports that President Joe Biden is slated to propose much higher capital gains taxes for the rich.The Dow Jones Industrial Average dropped 321.41 points, or 1%, to 33,815.90. At its low of the day, the blue-chip benchmark fell 420 points. The S&amp;P 500 erased earlier gains and closed 0.9% lower at 4,134.98, while the Nasdaq Composite slid 0.9% to 13,818.41.7 hours agoBloomberg News reported Thursday afternoon that Biden is planning a capital gains tax hike to as high as...

Dow closes more than 300 points lower following reports of Biden eyeing capital gains tax hike

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