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Stock futures pointed to a higher open Friday morning, steadying after selling off sharply on Thursday following a report that President Joe Biden was eyeing a proposal to increase the capital gains tax rate on wealthy individuals.
Contracts on the S&P 500 edged up, after the index dropped 0.9% during the regular trading day for its worst session in five weeks. The Dow and the Nasdaq each also sank following the report from Bloomberg, which suggested Biden was considering increasing the capital gains tax rate on those earning more than $1 million to 39.6%. The current base capital gains tax rate is 20%.
„I think the immediate reaction was probably a bit overdone. These proposals come out and you never know, especially with tax proposals, where we’ll end up. So it looks like an opening bid. I’m sure there will be intense lobbying from the investment community to adjust those numbers,“ Kathy Jones, Charles Schwab chief fixed income strategist, told Yahoo Finance on Thursday. „But I think at the moment, when you have very high valuations in the market, anything that is bad news can spark a bit of a sell-off.“
In early trading, shares of Dow-component Intel (INTC) dropped after the chip-maker posted first-quarter data center revenues that missed expectations. Mattel (MAT) shares jumped after quarterly net sales surged far more than expected and the toy-maker raised its full-year outlook. Snap (SNAP) shares rose as quarterly revenue and daily active users extended 2020’s momentum and each sharply exceeded estimates.
Overall this week, stocks have hovered just below record levels as investors sought new equity drivers and more data on corporate earnings results and economic activity.
In another report that appeared to corroborate the pick-up in economic activity, Thursday’s initial unemployment claims report showed just 547,000 individuals filed for first-time unemployment benefits last week, marking an unexpected improvement to a new pandemic-era low. Next week’s advanced print on first-quarter gross domestic product and quarterly results from mega-cap companies including Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL) and Facebook (FB), are expected to further underscore the latest pick-up in economic activity and corporate profits during the recovery from the pandemic.
„We’ve spent kind of the entire month of April struggling for direction in the markets. We’ve had 13 out of the 14 slowest days of the year in April. We’re just looking for new catalysts. I think the market has already priced in a lot of the surge in economic growth, in earnings growth,“ Gabriela Santos, global market strategist for JPMorgan Asset Management, told Yahoo Finance. „And it just feels like we should consolidate, maybe even have a pullback before we continue that trend higher over 6 months and 12 months. So I think this is just part of the market struggling to find direction in the short term.“
„Specifically related to capital gains, this should not be a surprise,“ sh added. „It was a part of President Biden’s agenda during the election and it was anticipated as part of the American Families Plan which should be presented next week and will be a discussion for the rest of the year. So [stocks are] just struggling to find direction in what otherwise we still consider to be a favorable backdrop for equities.“
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7:05 a.m. ET Friday: Stock futures rise, shaking off Thursday’s declines
Here’s where markets were trading ahead of the opening bell:
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S&P 500 futures (ES=F): 4,138.25, up 10.5 points or 0.25%
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Dow futures (YM=F): 33,777.00, up 69 points or 0.2%
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Nasdaq futures (NQ=F): 13,780.25, up 30.00 points or 0.22%
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Crude (CL=F): +$0.35 (+0.57%) to $61.78 a barrel
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Gold (GC=F): +$5.70 (+0.32%) to $1,787.70 per ounce
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10-year Treasury (^TNX): -0.5 bps to yield 1.551%
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6:02 p.m. ET Thursday: Stock futures edge lower
Here’s where markets were trading as the overnight session began.
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S&P 500 futures (ES=F): 4,129.75, up 2 points or 0.05%
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Dow futures (YM=F): 33,720.00, up 11 points or 0.03%
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Nasdaq futures (NQ=F): 13,759.75, up 9.5 points or 0.07%
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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