Stocks Pare Losses as Biden Floats Lower Tax Rate: Markets Wrap

Stocks Pare Losses as Biden Floats Lower Tax Rate: Markets Wrap
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Jennifer Bissell-Linsk
·3 min read
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(Bloomberg) -- U.S. equities pared back some losses on Thursday after a report President Joe Biden may be open to a lower corporate tax rate than 28%.

The S&P 500 rose from session lows after Biden was said to have pitched a 15% minimum tax on U.S. corporations to Republicans as a way to fund a bipartisan infrastructure package.

Previously the benchmark index was lower after a raft of strong economic data prompted concerns the Federal Reserve may withdraw its support sooner than expected. An ADP report showed payrolls at U.S. firms gained by the most in nearly a year, while additional figures on the economic health of the services sector rose to the highest on record.

The dollar was stronger. Commodities, including gold and copper, were lower. And Treasuries fell. Meanwhile, the rally in so-called meme stocks including AMC Entertainment Holdings Inc. began to fade.

With U.S. equities locked in a tight range for the past month, investors are on the lookout for any signs that the Fed might start to taper its asset purchases. St. Louis Fed President James Bullard said Thursday the U.S. labor market might be tighter than suggested by the current unemployment rate. Up next, all eyes will be on Friday’s jobs report after separate data Thursday indicated strength was afoot. U.S. jobless claims dipped below 400,000 for the first time during the pandemic last week.

“With seemingly all systems go on the jobs front, the economy is flashing some very real signs that this isn’t just a comeback -- expansion mode could be on the horizon,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial. “So what does that translate to? Likely more pressure on the Fed to make a move -- perhaps sooner than many thought from the outset.”

The weakness in U.S. shares followed declines in Europe and Asia on the back of mounting geopolitical tensions. Russia said it would eliminate the dollar from its National Wellbeing Fund to reduce exposure to U.S. assets. Meanwhile, the U.S. is set to amend an investment ban on companies linked to the Chinese military.

“The summer of uncertainty is on full display,” Dennis DeBusschere, head of portfolio strategy at Evercore ISI, wrote in a note. “10-year yields remain anchored and there is pressure on the USD, but leading indicators are strong, credit conditions are easy and market volatility remains low. That backdrop favors risk assets.”

These are some of the main moves in markets:

Stocks

The S&P 500 fell 0.2%, more than any closing loss since May 25 as of 2:05 p.m. New York timeThe Nasdaq 100 fell 0.8%, more than any closing loss since May 12The Dow Jones Industrial Average rose 0.1%, climbing for the sixth straight day, the longest winning streak since March 15The MSCI World index fell 0.4% at 2:05 p.m. New York time, the most since May 19

Currencies

The Bloomberg Dollar Spot Index rose 0.7% at 2:05 p.m. New York time, the most since Jan. 27The euro slipped 0.7%, more than any closing loss since April 30The British pound slipped 0.6%, more than any closing loss since May 12The Japanese yen slipped 0.7%, more than any closing loss since May 12

Bonds

The yield on 10-year Treasuries advanced four basis points, more than any closing gain since May 12Germany’s 10-year yield advanced two basis points to -0.18%Britain’s 10-year yield advanced four basis points to 0.84%

Commodities

West Texas Intermediate crude fell 0.3% to $69 a barrelGold futures fell 1.9%, the most since March 31

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