Stock Futures Plunge on Capital Gains Tax Headlines

Equities

Major US stock index futures finished yesterday's session in the red zone as several news outlets published reports on a plan from Biden's administration to raise capital gains tax for top earners. In brief, a capital gains tax is a tax applied on the growth in the value of an investment incurred when the investor sells his investments. Mostly, these investments are stocks, bonds, precious metals, real estate, crypto, etc. The reports declare that Biden is planning to raise capital gains tax from 20% to almost 40% on those earning above $1 million. The market reacted negatively to those headlines. The Dow Jones Industrial Average futures dropped to 33600, the S&P500 futures fell to 4114, and Nasdaq futures declined to 13694. In the aftermath, it is hard for Biden and co. to push such a high tax rate through senates.

USD

The dollar index, which measures the greenback against a basket of major currencies, continues to trade above the 91 level as Treasury yields hold steady. The US 10-year yields failed to break below the previous interim low, giving the dollar a slight push. The US economic data remains solid, with Initial Jobless Claims rising by only 547 thousand, the lowest reading since the beginning of the pandemic, confirming a strong rebound in the economic activity. Market participants will be looking forward to Powell's comments next week on the economic releases. Meanwhile, in the Eurozone, the European Central Bank left monetary policy unchanged with interest rates at their record low, and pandemic asset purchases at 1.85 trillion euros. The EURUSD is trading near 1.2025 at the moment of writing the report, and the USDJPY is trading below 108.

Metals

Precious metals prices eased a little as the dollar traded firmer with treasury yields holding ground. The price of a gold ounce fell from $1797 the highest since late February to $1777, the price of a silver ounce slipped to $26.15, and palladium eased to $2847.

Oil

Oil prices surged trimming early week losses amid optimism over the economic recovery in the United States and Europe. The US economic indicators are showing that the economic activity is picking up significantly, and in the Euro region, the Central Bank is bullish on the recovery despite fears from new virus variants. The West Texas Intermediate crude June contract rose to $62.09, and the Brent blend June contract rallied to $65.81.

Major Economic Events