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Stocks fall on worries of capital gains tax as Housing Market is on a roll




U.S. stocks dived on Thursday on reports President Joe Biden planned to almost double the capital gains tax, news analysts said provided an excuse to take profits in a directionless market ahead of big tech’s earnings next week.

Major indexes wavered between small gains and losses for much of the session before tumbling on the headlines.

The S&P 500 fell 38.44 points, or 0.9%, to 4134.98. The Dow Jones Industrial Average dropped 321.41 points, or 0.9%, to 33815.90. The Nasdaq Composite slid 131.81 points, or 0.9%, to 13818.41.

Biden intends to propose raising the marginal income tax rate to 39.6% from 37% and nearly double capital gains taxes to 39.6% for people earning more than $1 million, as per sources. Also, the proposal targets about $1 trillion for child care, universal pre-kindergarten education, and paid leave for workers.

Amongst the major movers, American Airlines Group Inc and Southwest Airlines Co reported smaller-than-expected Q1losses, signaling a revival in travel demand. Both stocks fell, with American down 4.5% and Southwest 1.6%. Mattel, the toy manufacturer’s stock rose 8.6% and so did the stock of Snap, the social media company, which ticked up 4.9% as they both released better-than-expected first-quarter results.

Shares of the semiconductor manufacturer, Skyworks Solutions, Silicon Labs rose by 4% after the company announced it will acquire the infrastructure and automotive business of Silicon Labs for $2.75 billion. The deal is expected to close in the third quarter of this year. The stock rallied by more than 13%.

Bitcoin prices dropped more than 1%, holding just above $54,000, on early Thursday. The cryptocurrency ran up to a new high above $64,800 on April 14, ahead of the Coinbase Global IPO. Year to date, Bitcoin remains up more than 85%, after starting the year just above $29,000.

Meanwhile, studies indicate that a year ago, when Covid-19 cases first skyrocketed across the U.S., the home-buying market nosedived as people were advised to stay home to avoid getting sick. At the time, it seemed the housing market was poised for a downturn.

Instead, the opposite occurred.

When real-estate transactions were allowed to resume, Americans flocked to buy homes. With jobs turning remote and schools becoming virtual, families sought more space in the suburbs.

Some city residents tired of their cramped apartments and decided to make a permanent move to more rural areas, while others merely opted to purchase second homes to escape to amid the stay-at-home orders.

With the sudden crush of people seeking to buy homes, prices skyrocketed. By November, home prices were on a growth trajectory since the Great Recession, and price appreciation has yet to slow.

The demand for housing also triggered a building craze as the last year saw a 12% gain in the construction of single-family homes. The good news for homeowners in a bind right now is that generally speaking, they have built up equity in their homes.

Most housing experts project that mortgage rates will only rise somewhat modestly this year. Interest rates have rebounded from the record lows set at the start of the year, but in recent works, they settled around 3%.

And given the high demand for housing nationwide, housing experts say that most of these families should be able to sell their homes—even for a profit—and return to renting if the need arises.

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