Wall Street has rebounded from previous losses after economic data showed that the US economy is on a positive trajectory. Factory data and new home sales highlighted a booming economy with megacap technology shares rising in anticipation of strong earnings reports in the coming days.
In the cash market on Friday, the benchmark S&P 500 Index settled at 4180.17, increasing by 45.19 or +1.08% while the blue chip Dow Jones Industrial Average finished at 34043.49, 227.59 or 0.67% increase. The technology-driven NASDAQ Composite closed at 14016.81, up 198.40 or +1.42%.
Stocks jumped on Friday after steep losses the previous trading session following multiple news outlets reporting on Thursday afternoon that there is a proposed much higher capital gains tax for the rich, with Bloomberg News stating that capital gains tax hike could be as high as 43.4% for wealthy Americans.
Investors expectedly reacted to the news with buyers seemingly taking over the market even as analysts downplayed the impact of the tax hike story.
“We expect Congress will pass a scaled back version of this tax increase,” wrote Goldman Sachs economists in a note. “We expect Congress will settle on a more modest increase, potentially around 28%.”
Equities were also boosted after U.S. factory activity recorded great results in early April. IHS Markit’s flash U.S. manufacturing PMI increased to 60.6 in the first half of April, the highest reading since the series started in May 2007.
Another sign of strong consumer demand is the sales of new U.S. single-family homes rebounding beyond expectation in March, a record that has been attributed to an acute shortage of previously owned houses on the market.
Earnings will take center stage in the coming days when 40% of the S&P 500’s market cap report on Tuesday through Thursday. This will include the tech and related heavyweights of Microsoft Corp, Google-parent Alphabet Inc., Apple Inc., and Facebook Inc. The brands, as well as Amazon.com Inc., delivered the biggest upside to a broad-based rally in which advancing shares easily outpaced decliners.
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