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Biden Tax Plans, Intel Worries, PMIs and Russia Hikes - What's Moving Markets

EconomyApr 23, 2021 06:39AM ET
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© Reuters

By Geoffrey Smith 

Investing.com -- Reports of Joe Biden’s tax hike plans unsettled markets, but stock futures are regaining a measure of composure this morning. Crypto prices are slumping, with Bitcoin dipping below $50,000. Pat Gelsinger’s first quarterly report as CEO of Intel (NASDAQ:INTC) was a mild disappointment. New home sales data are due, along with earnings from Honeywell, Kimberly-Clark (NYSE:KMB) and Schlumberger. And Russia becomes the latest big emerging market central bank to raise interest rates aggressively to rein in inflation. Here’s what you need to know in financial markets on Friday, April 23rd.

1. Markets unsettled by tax hike report

Stocks faltered in response to reports that the U.S. administration is planning to increase capital gains taxes on wealthier investors in its next package of economic measures.

Bloomberg reported that the marginal rate of capital gains tax could rise to 39.6%, compared to a current base rate of 20%, and would only apply to those earning more than $1 million a year.

President Joe Biden had campaigned last year on a platform of taxing labor and capital more equally, and plans to reverse a key element of his predecessor’s 2017 tax cuts do not come as a surprise. They nonetheless prompted fears that investors could liquidate current stock holdings in the near to medium-term to lock in a lower tax rate on their gains.

A further implication of the plans, according to Bloomberg, was the end of the so-called carried interest benefit for private equity, which may weaken PE’s ability to offer chunky buyouts to publicly owned companies.

2. Intel's report hints at a long road back to primacy

Intel stock fell after the chipmaker reported disappointing guidance for the current quarter, which hinted at a loss of market share in the key segment of data center chips.

Reporting for the first time under new CEO Pat Gelsinger, the company said it expects to earn only $1.05 a share, rather than the $1.09 average forecast, a foretaste of the pressure on margins to come as Intel spends heavily to build new capacity.

The company echoed warnings from Taiwan Semiconductor Manufacturing that the global shortage of chips is likely to run at least into 2022.  

Among chip buyers, Audi followed Volvo and Hyundai this week in warning that the shortage is likely to hit production of new vehicles.  However, the prospect of higher input costs didn’t stop Germany’s Daimler (OTC:DMLRY) from raising its operating margin target to 10%-12% from 8%-10% previously for its main car and van unit.

3. Stocks set to bounce a little; Honeywell, Kimberly-Clark, Schlumberger due to report

U.S. stocks are set to open moderately higher Friday as the market regains a measure of composure after the ‘shock’ of the looming tax hike.

By 6:30 AM ET (1030 GMT), Dow Jones futures, S&P 500 futures and Nasdaq 100 futures were all up by around 0.2%, after drops of nearly 1% on Thursday.

Honeywell (NYSE:HON), Kimberly-Clark and oilfield services group Schlumberger (NYSE:SLB) head the earnings roster before the open, along with American Express (NYSE:AXP) and Royal Caribbean (NYSE:RCL) Cruises.  Celanese and Verisign (NASDAQ:VRSN) will also be in focus after reporting late on Thursday.

The data calendar is headed by new home sales data (which come on the heels of a second straight drop in existing home sales on Thursday) and IHS Markit’s purchasing managers index for the U.S.  European PMIs released earlier turned out stronger than expected, with the services sector signaling growth for the first time since September.

4. Bitcoin below $50,000 as crypto slumps across the board.

Bitcoin prices fell below $50,000 for the first time since early March as the reverberations from last week’s power outage in Xinjiang and fears of capital gains tax increases undermined the cryptocurrency’s momentum further.

By 6:30 AM ET, Bitcoin traded at $49,277, down 9.3% from late Thursday and down over 23% from its peak. Other digital assets were also affected, with Ethereum falling 10.5% to $2,247 and XRP falling 15.6% to $1.0763. Dogecoin lost 10% to trade at just under 24c.

The volatility is a fresh reminder of the shortcomings of crypto with regard to all three of the traditional functions of a currency: to act as a store of value, a means of exchange and a unit of account. The asset class’s image was arguably not helped by a spectacularly self-serving research blog issued by Cathie Wood’s firm ARK trying to justify the energy intensity of Bitcoin mining.  

5. Russia hikes rates to rein in inflation

Russian assets gained across the board as President Vladimir Putin started to withdraw troops from the country’s border with Ukraine, easing fears of a fresh invasion.

Russia had massed over 100,000 troops on the border, according to European sources, seven years after it annexed Crimea and established two client breakaway states in eastern Ukraine, in what appeared a first test of the new U.S. administration’s approach to what is effectively a frozen conflict.

The ruble traded below 75 to the dollar for the first time in a month, also helped by a larger-than-expected interest rate hike from the Russian central bank, which raised its key rate to 5% from 4.5%. It’s the latest big emerging central bank to move to rein in inflation, in contrast to advanced economy central banks which – with the exception of Canada this week – are in no hurry to withdraw monetary accommodation.

The RTS stock index rose 0.4% to its highest in a month.

Biden Tax Plans, Intel Worries, PMIs and Russia Hikes - What's Moving Markets
 

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Comments (15)
Dave Jones
Dave Jones Apr 23, 2021 2:03PM ET
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you guys....honestly do you think big corporations are going to pay more tax? you poor people
Kelly Mayer
Kelly Mayer Apr 23, 2021 12:25PM ET
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Biden is one catastrophic decision after another. They are trying to reverse 4 years of Trump and continuing with their pre-Trump agenda, no matter how catastrophic that is for WeThePeople. These people need to be removed as they are not for the People. Along with the paid CCP supporters in here.
james marshall
james marshall Apr 23, 2021 11:56AM ET
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Rich dont pay taxes, only the middle class, and poor. Maybe educate yourself before you beleive the left’s illusion.
Bev Mcguffee
Bev Mcguffee Apr 23, 2021 9:35AM ET
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Per Biden, he has never invested into a stock, bond or had a savings account. This speaks volumes  for not understanding nor appreciating the value of investing, which include taking chances in businesses as investments, therefore, reaping tax benefits.  In reality, there is no possible way Biden can pass even close to what he is proposing because too many in Washington, in both houses and both parties, do have investments in stocks and bonds, as do their financial supporters.  This market, including cryptocurrency, is all about profit taking and volatility so as to scare the individual investor into selling.  This is and has been an extremely manipulated market with more and more AI ( Algorithms) dominating.  Why anyone would vote for anyone whose platform consist of higher taxes is beyond belief?  This is like stabbing yourself in the foot (self-destructive).  Furthermore, regardless of what is said, inflation is on the rise.  How much is the question?
DJ Ryte
DJ Ryte Apr 23, 2021 9:35AM ET
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Only the 25 million core dem zombies, 20 million socialists, 20 million manipulated by race propaganda and 10 million fantasy "created-out-of-thin-air" voters. That's who.
Mase Gumbo
Mase Gumbo Apr 23, 2021 9:35AM ET
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trumpy more ons on full display
Jeff Shinn
Alien_Ancestry Apr 23, 2021 9:35AM ET
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Coward and Piven. Look it up and understand this time and place are just milestones of a much larger plan
Jeff Shinn
Alien_Ancestry Apr 23, 2021 9:35AM ET
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Sorry spellcheck got me...Cloward-Piven
Semih Unalan
Semih Unalan Apr 23, 2021 9:12AM ET
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The rich won't pay a dime. Futile effort.
Zach Lohman
Zach Lohman Apr 23, 2021 8:35AM ET
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All those capital gains were already taxed at the corporate and labor level. The rates Should be lower than the rest. They already have a previous tax element in them.
neang aee 냥에
neang aee 냥에 Apr 23, 2021 8:25AM ET
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Choice of Amerian Voters~ !Let's Socialise~!!!
Fred Diebold
Fred Diebold Apr 23, 2021 7:47AM ET
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Bidens tax plan is like a company or person standing in a bucket and trying to raise themselves up by the bucket handle.
Bagus Panuntun
Bagus Panuntun Apr 23, 2021 7:41AM ET
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likely Gold will do well considering the impact of huge stimulus that results in hyperinflation that all the central bankers start to worry now
Fozzy Ferdinand
Fozzinand Apr 23, 2021 7:24AM ET
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When Russia has better monetary policy than America. Sigh
CHARLIE HAYDEN
CHARLIE HAYDEN Apr 23, 2021 7:15AM ET
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The working class pay taxesThe rich pay accountantsThe wealthy pay politicians42 of the largest US corporations have paid no taxes in the last 3 years
Brian Booth
Brian Booth Apr 23, 2021 7:15AM ET
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People like to make it sound so terrible that some companies pay "no taxes". But the company pays employees who are taxed. Investors have capital gains that are taxed. The government is still collecting lots of taxes because of these companies.
Ad Cline
Ad Cline Apr 23, 2021 7:15AM ET
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Brian Booth that's right Brian everyone has been paying taxes except the big Corporations and the super wealthy.
Brian Booth
Brian Booth Apr 23, 2021 7:15AM ET
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Ad Cline  It makes no difference if companies pay no tax. The corporation is owned by the investors and they are paying capital gains. If the corporation pays 15% tax (for example) that translates to slower stock growth. That means investors pay less capital gain. If the company pays zero tax, the company grows faster (translating to higher stock price) which means individuals are paying more capital gains. It is Econ-101. Big companies paying "zero" tax means nothing. It is just something politicians like to say to get elected. To your point, the wealthy individuals should be paying their fair share. Their hidden wealth is a problem. But if I was wealthy, I'd do it too!
Adrian White
Adrian White Apr 23, 2021 7:15AM ET
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Brian, you have a point, but the difference is that investors' capital gains tax is only paid when they dispose of their shares, which could be years later. Corporate tax, however, can be collected every year. In addition, the vast majority of public corporate shares are held in non-taxable retirement accounts, so that further weakens your argument that "it makes no difference if large corporations don't pay any tax".
Brian Booth
Brian Booth Apr 23, 2021 7:15AM ET
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Adrian White  Fair enough. So it really boils down to "collect tax now" or "collect tax later" and not "it makes no difference". Even with retirement accounts, the worst case is tax is paid after withdrawal.
Janet Chou
Janet Chou Apr 23, 2021 7:07AM ET
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Unless you make over a million/yr. Nothing to worry about.
Matt Smelcer
Matt Smelcer Apr 23, 2021 7:07AM ET
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Where do you think jobs come from? They come the wealthy who invest their money into business and people.
Bogdan Gabriel Matasaru
Bogdan Gabriel Matasaru Apr 23, 2021 7:07AM ET
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right now 1 milion still means something... but with this inflation... ;)
Anthony Cloud
Anthony Cloud Apr 23, 2021 7:07AM ET
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Taxes will go up the lower and middle class too.
tim banks
tim banks Apr 23, 2021 7:07AM ET
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haha the last tax cut did nothing for jobs and only stimulated the stock market. so a tax hike will do the opposite.
Jay Rhyder
Jay Rhyder Apr 23, 2021 7:00AM ET
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Biden's plans are anti-investor... He seems to want to ensure everyone is poor... >_>
Joel Bennett
Joel Bennett Apr 23, 2021 7:00AM ET
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Except the Washington Elite.
TheEnd IsNigh
TheEnd IsNigh Apr 23, 2021 6:58AM ET
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Who didn't see this coming? When you sling money out to the masses, it's gotta come from somewhere. And what better target than the evil, satanic rich, whom the Democrats love to demonize. The writing was on the wall long ago.
Chris Cummins
Chris Cummins Apr 23, 2021 6:58AM ET
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Sling money? You mean the 6.7 trillion Trumpy threw out to his boys?
Ahmed Ogidan
Ahmed Ogidan Apr 23, 2021 6:57AM ET
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Finally, the ultra rich are being taxed.
Ed Kutch
Ed Kutch Apr 23, 2021 6:57AM ET
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that's what they say....until the bill comes due to everyone
Jimmy Smith
Jimmy Smith Apr 23, 2021 6:57AM ET
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Proof that Econ 101 wasn't required in your Underwater Basketweaving Degree.
 
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