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Friday, May 7, 2021
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U.S. stocks drop on news of Biden tax proposals

U.S. stocks dived on Thursday (April 22) on reports President Joe Biden planned to almost double the capital gains tax, news analysts said provided an excuse to take profits in a directionless market ahead of big tech’s earnings next week.

The three main indexes on Wall Street also fell on reports that Biden planned to raise income taxes on the wealthy, a proposal some said would be hard to pass in Congress.

Biden will propose raising the marginal income tax rate to 39.6% from 37% and nearly double capital gains taxes to 39.6% for people earning more than $1 million, sources told Reuters.

The proposal targets about $1 trillion for child care, universal pre-kindergarten education and paid leave for workers, the sources said.

Markets have been listless after the Dow and S&P 500 scaled all-time peaks last week as investors await guidance from Microsoft Corp, Google parent Alphabet Inc and Facebook Inc when they report earnings next week.

Earlier in the session the S&P 500 healthcare sector hit a fresh record high while industrials were the biggest gainers.

American Airlines Group Inc and Southwest Airlines Co reported smaller-than-expected quarterly losses, signaling a revival in travel demand. Both shares fell.

Investors welcomed data showing the number of Americans filing new claims for unemployment benefits last week dropped to a fresh one-year low. The Labor Department report suggested layoffs were subsiding and expectations were rising for another month of blockbuster job growth in April.

Separately, data showed U.S. home sales fell to a seven-month low in March, as an acute property shortage boosted prices and made owning a house more expensive for some first-time buyers.

(Production by: Hyeong Mi Kim, Catherine Koppel, Dan Fastenberg and Fred Katayama)

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