U.S stocks flirt with record as investors shake off tax jitters

What are major benchmarks doing?

• The Dow Jones Industrial Average
  DJIA,
  +0.67%
  rose 270 points, or 0.8%, to near 34,086.
• The S&P 500
  SPX,
  +1.09%
  was up about 52 points, or 1.3%, near 4,187, trading above its April 16 closing high at 4,185.47.
• The Nasdaq Composite
  COMP,
  +1.44%
  jumped 224 points, or 1.6%, to 14,042.

On Thursday, the Dow tumbled 321.40 points, or 0.9%, for its biggest one-day fall since March 4, while the S&P 500 and Nasdaq Composite also fell 0.9%. All three benchmarks are still on track for weekly declines.

What’s driving the market?

Stocks rallied, with nearly all major sectors in the S&P 500 advancing, after the indexes turned south Thursday when Bloomberg News and others reported that Biden would propose a hike in the capital-gains tax rate to 39.6% from 20% for individuals making more than $1 million a year. While the reports dented sentiment, analysts noted that the proposal was in line with Biden’s campaign promises and predicted a hike would be scaled back in congressional negotiations.

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“The 39.6% figure is very much in line with the campaign pledge and shouldn’t shock, but the fact we’ve seen selling of risk suggests the market is far more sensitive to bad news, and this will happen when froth is prevalent,” said Chris Weston, head of research at Pepperstone, in a note. “Consolidation seems to the order here in the short-term and it feels like we’re at the mercy of a period of choppy price action,” he said.

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David Joy, Ameriprise Financial’s chief market strategist, also sees stocks recovering from the market’s surprising “knee-jerk reaction” to reports the White House will propose increasing tax rates. “It was no secret,” Joy said Friday in a phone interview. “President Biden had campaigned on those very details.” 

Joy expects stocks will continue to be buoyed by a stronger economy as the pandemic persists.

In U.S. economic data, the IHS Markit purchasing managers index for the manufacturing sector rose to a record 60.5 in April from 59.1 a month earlier, while the services sector PMI jumped to 63.1 from 60.4. A reading of more than 50 indicates an expansion in activity.

“Supporting the rebound with equities was a record increase in business output,” Edward Moya, senior market analyst for the Americas at OANDA, said in a note Friday afternoon.

New home sales rose to a seasonally-adjusted annual rate of 1.021 million in March, the U.S. Census Bureau reported — the fastest pace since 2006. Month-over-month, sales rose 20.7%. Also, the Census Bureau revised the sales figure for February up to a rate of 846,000, from the originally reported rate of 775,000. 

Which companies are in focus?

• Intel Corp.
  INTC,
  -5.32%
  shares were down 5.6%, despite a big earnings beat and raised annual guidance, as a large dip in data-center sales was offset by strength in sales of personal computers and a departing memory business.
• Shares of Snap Inc.
  SNAP,
  +7.45%
  jumped 2.9% after the social-media company posted first-quarter results that surpassed analyst estimates.
• Mattel Inc.
  MAT,
  +0.81%
  shares were up 1.8% after the toy maker reported a narrower-than-expected quarterly loss and said its sales surged nearly 50%.
• Boston Beer Co.
  SAM,
  +3.04%,
  known for its Sam Adams-branded beers, reported earnings late Thursday that soared past analyst expectations, buoyed in part by sales of hard seltzers. Shares were up 1.8%.
• Gap Inc.
  GPS,
  +2.32%
   shares were up 2.2% Friday, after the retailer said celebrated gymnast Simone Biles will work with its Athleta brand.
• Shares of Dow component Honeywell International Inc.
  HON,
  -2.08%
  were off 2.1% after beating Wall Street estimates for earnings and revenues and revising its 2021 outlook.
• Schlumberger Ltd.
  SLB,
  +1.82%
  shares rose 1.9% after the energy-services giant posted better-than-expected earnings for the first quarter.
• Shares of American Express Co.
  AXP,
  -1.92%
  fell 1.8% after the card company’s first-quarter revenue fell short of expectations.
• Kimberly-Clark Corp.
  KMB,
  -5.86%
  stock fell 6.1% after the consumer products company, whose brands include Kleenex, Huggies, Scott and Depends, reported first-quarter profit and sales that came in below expectations, and lowered its full-year outlook. 

What are other markets doing?

• The yield on the 10-year Treasury note
  BX:TMUBMUSD10Y
  was little changed Friday afternoon at 1.562%. Yields and bond prices move in opposite directions.
• The ICE U.S. Dollar Index
  DXY,
  -0.54%,
  a measure of the currency against a basket of six major rivals, fell 0.5% to 90.86.
• Bitcoin
  BTCUSD,
  -1.13%
  was down 2.5% Friday afternoon in a move that some observers tied to tax jitters, with the digital asset falling below $50,000.
• Oil futures settled 1.2% higher at $62.14 a barrel on the New York Mercantile Exchange, but posted a weekly decline amid worries about a surge in COVID-19 cases in India and Japan.
• Gold futures gave up modest early gains to trade lower, with the June contract
  GCM21,
  -0.31%
  down $4.20, or 0.2%, to settle at $1,777.80 an ounce.
• In Europe, the Stoxx 600 index
  SXXP,
  -0.13%
  closed 0.1% lower and London’s FTSE 100
  UKX,
  +0.00%
  ended the session unchanged.
• In Asia, the Shanghai Composite
  SHCOMP,
  +0.26%
  rose 0.3%, Hong Kong’s Hang Seng Index
  HSI,
  +1.12%
  jumped 1.1% and Japan’s Nikkei 225
  NIK,
  -0.57%
  fell 0.6%.