Stocks Drop on Biden Plan to Lift Capital-Gain Tax

U.S. stocks had their biggest slide in five weeks after President Joe Biden was said to propose almost doubling the capital-gains tax for the wealthy. The dollar rose.

The S&P 500 turned lower after Bloomberg News reported that for those earning $1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for rich investors could be as high as 43.4%. Speculation arose that some traders could sell shares before any change was made to capture the lower rate. Equities whipsawed throughout the session amid mixed economic data and renewed concern the pandemic was worsening.

All major groups in the S&P 500 fell, led by material, energy and tech shares. AT&T Inc. rallied after beating profit estimates. Data showed sales of previously owned U.S. homes slid in March to a seven-month low, while jobless claims posted an unexpected decline last week.

“Sticker shock over some of these tax figures will be hard to shake off for some investors,” Edward Moya, senior market analyst at Oanda, wrote in a note. “Some traders are looking for an excuse to lock in profits and they might choose to use this tax story as their catalyst.”