In this photo provided by the New York Stock Exchange, trader Fred DeMarco, right, works on the floor, Thursday April 22, 2021. Stocks wobbled between small gains and losses Thursday as investors continue to focus on company earnings reports and the economic recovery. (Courtney Crow/New York Stock Exchange via AP)
Stocks turned lower Thursday following a report saying President Biden will propose a hefty tax increase on the gains wealthy individuals reap from investments.
Investors who earn $1 million or more would have to pay a 39.6% tax rate on any capital gains, nearly double the current rate for Americans in that income bracket, according to the report by Bloomberg. A separate surtax on investment income could boost the overall federal tax rate for wealthy investors as high as 43.3%, the report said, citing unnamed people familiar with the proposal.
The S&P 500 was down 1% as of 1:58 p.m. Eastern, having shed an earlier gain. The Dow Jones Industrial Average fell 344 points, or 1%, to 33,789. The Nasdaq was 1% lower. The S&P 500 closed higher Wednesday, ending a two-day slide, but it's still down for the week.
The selling was widespread, with every sector in the S&P 500 lower. Technology stocks, banks and companies that rely on consumer spending, accounted for much of the decline. Treasury yields held steady.
Earnings are a key focus for investors as the bulk of companies in the S&P 500 spend the next few weeks reporting their financial results. Wall Street is hoping to get a better sense of just how much companies in various sectors are benefiting from the economic recovery. They are also listening for clues on prospects for the recovery to continue as vaccine distribution rolls on and people try to return to some semblance of normal.
AT&T rose 3.7% after reporting results that beat expectations, helped by higher wireless phone charges as well as the success of its streaming service HBOMax. Equifax also rose after reporting strong results.
Union Pacific fell 3% after the railroad operator reported a 9% drop in profit.
The broader market has had a choppy week of ups and downs as Wall Street digests earnings and tries to gauge how much and how quickly the U.S. and global economy will recover through 2021.
“It’s not a clear time in the market,” said Jay Hatfield, CEO and portfolio manager at Infrastructure Capital Advisors. “You’re in a trading range until you get some more clarity on the global recovery.”
The U.S. is showing solid signs of recovery, while Europe and other parts of the world lag behind. That will likely change as soon as more vaccines are distributed internationally, Hatfield said.
Credit Suisse dropped 3.4% after the Swiss bank announced it would issue more stock to help it recover from the losses it suffered because of the implosion of a hedge fund earlier this year. Credit Suisse had been a primary backer of Archegos Capital Management, which collapsed last month after several of its bets went sour.
Investors will be looking to Intel after the closing bell when the chip giant reports its quarterly results.
Investors got a bit of good news on the economy when the Labor Department reported that the number of Americans filing for unemployment fell again last week. Unemployment claims were 547,000, the lowest point since the pandemic struck and an encouraging sign that layoffs are slowing.
The yield on the 10-year Treasury held steady at 1.56%.
Featured Article: Market Timing - The Benefits and the Danger7 Semiconductor Stocks Set to Gain From the Chip Shortage
Who knew that something so tiny could create such a big problem? However, that’s the case with the semiconductor industry. Chip manufacturers are facing supply chain disruptions due to the Covid-19 pandemic.
Semiconductors are in high demand for the big tech companies who need the chips to power the servers for their data centers. But they are also needed for much of the technology we take for granted including laptops, tablets, mobile phones, gaming consoles, and automobiles – a sector that seems to be at the root of the current crisis.
Any weekend mechanic knows that even traditional internal combustion cars are heavily reliant on electronics. In fact, electronic parts and components account for 40% of a new, internal combustion vehicle. That’s more than doubled since 2000.
However as it turns out, some manufacturers may have overestimated how soon consumers would be ready for an “all-electric” future. And that meant that they didn’t forecast how much demand there would be for the kind of chips needed to do the mundane, but vital tasks of steering, braking, and even powering windows up and down.
Part of the problem is that U.S. businesses are heavily reliant on countries like China and Taiwan for their semiconductors. In fact, only about 12.5% of semiconductor manufacturing is done in the United States.
Of course, this creates a tremendous opportunity for the companies that manufacture these chips. And it comes at a good time. The semiconductor sector is notoriously cyclical and was coming down from the elevated demand for the 5G buildout.
In this special presentation, we’ll give you a list of seven semiconductor companies that you can invest in to take advantage of this opportunity.
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