Stocks Move Higher As Traders Shrug Off Tax Worries

Meanwhile, weak dollar provides support to commodity markets.
All Eyes On Biden’s Tax Proposal
Yesterday, S&P 500 found itself under pressure amid reports about potential tax increases for wealthy individuals and businesses. The capital gains tax for those who make over $1 million per year may increase to as much as 39.6%.

It remains to be seen whether Biden’s proposal will be able to get through Congress without material changes. At the same time, some traders and investors may want to take some profits ahead of the upcoming changes, triggering a wave of selling.

At this point, it looks that the market does not believe that a major tax increase will happen in the near term. S&P 500 futures are moving higher in premarket trading, suggesting that traders are using yesterday’s sell-off as an opportunity to buy stocks at lower levels.
Flash PMI Reports Show That The World Economy Continues To Recover
Today, the U.S. will release flash readings of Manufacturing PMI and Services PMI reports for April. Manufacturing PMI is projected to increase from 59.1 in March to 60.5 in April while Services PMI is expected to increase from 60.4 to 61.9.

PMI reports from other countries indicated that economic activity was rebounding faster than analysts expected. In the UK, Manufacturing PMI increased from 58.9 to 60.7 compared to analyst cosensus of 59 while Services PMI grew from 56.3 to 60.1.

Euro Area Manufacturing PMI grew from 62.5 to 63.3 while Services PMI increased from 49.6 to 50.3. Numbers above 50 show expansion so Euro Area services segment has finally returned to growth.

If the U.S. PMI reports also exceed analyst expectations, stocks may get additional support.

U.S. Dollar Is Under Pressure Ahead Of The Weekend
Strong PMI reports provided support to riskier currencies and put pressure on the U.S. dollar. Currently, the U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is trading at weekly lows.

Dollar’s weakness is bullish for commodity markets, and precious metals like gold and silver are moving closer to weekly highs. Weaker dollar may also provide additional support to stocks, especially in case Treasury yields continue to move lower.

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