Early Thursday, Dow Jones futures, S&P 500 futures, and Nasdaq futures all rose, with prominent earning movers including Apple portfolio, Facebook (FB), ServiceNow (NOW), and Qualcomm (QCOM). In a primetime speech to Congress, President Joe Biden advertised his tax hike reforms and latest budget plans.
The stock market fell on Wednesday as investors awaited Apple’s earnings and news on Biden’s tax hike. Investors have digested the recent Fed meeting announcement and remarks from Fed Chairman Jerome Powell, as well as overnight results from Microsoft portfolio, Alphabet parent Alphabet (GOOGL), and a slew of other companies. Google’s stock rose to a record level, while Microsoft’s stock fell slightly.
President Joe Biden outlined a $1.8 trillion social-support package in his first speech to Congress. The bundle of tax credits and domestic priorities, which include child care, paid maternity leave, and tuition-free community college, will be partially financed by higher taxes on the rich. President Biden is unconcerned about the financial market’s reaction. Biden plans to remind Congress in extracts from his speech that “Wall Street didn’t create this country; middle America did.”
Biden advocates for the highest income tax rate from 37% to 39.6 %. To help pay for his third major stimulus package, he suggested almost doubling the top capital gains tax rate from 20% to 39.6%. The top rate, after the ObamaCare surcharge, will be 43.4 %. The federal-and-state cap gains rate will exceed 50% in several states, including California and New York. Only those with more than $1 million a year will be subject to the higher capital gains tax limit.
Another question is whether the huge fiscal stimulus, combined with an all-out Federal Reserve, would trigger inflation, despite the fact that the US economy is still recovering from a pandemic. This, along with the tax hikes proposed by Biden, could be a one-two punch for the stock market.
The dollar remained at low levels after the Federal Reserve said that it is not willing to reduce policy support. The Fed stated that asset sales will continue and that inflationary pressures are likely to be “transitory.”