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Market Wrap for April 23: Higher Taxes Spook Traders

Cue the Beatles song “Taxman” on the record player. This week, traders fretted about higher taxes. Thanks to the stimulus efforts to revive the economy, higher taxes are almost assured. This week, the Biden administration floated some preliminary ideas including raising the capital gains tax on wealthy Americans. This follows similar plans with regards to the corporate tax rate. The tax scare continued, as later in the week, United States Secretary of the Treasury Janet Yellen mentioned that cryptocurrency gains should be taxed as high as 80%.

Earnings proved to be a strong point this trading week. With the season now underway, several key industry bellwethers reported profits for the first quarter of the year. So far, so good. Earnings have rebounded after the pandemic, and guidance continues to be strong.

As was economic data this week. While light in reporting, what was announced was good. Measures of labor and industrial health showed that the economy was bouncing back nicely after the pandemic. Nonetheless, traders took the results with a grain of salt as higher inflation expectations continued to stick around.

All in all, stocks spent much of the week trending lower as traders looked to sell high-growth equities in the face of higher taxes.

Be sure to check out our previous Wrap here, when earnings painted a mixed picture.

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