Before the Bell - One economic report will be released this morning and it will be a telling one, as data on sales of new homes for March will be issued at 10:00 (EDT). Expectations are that this often volatile issuance will show a solid advance, following yesterday’s mixed survey on March sales of existing homes. In that issuance, the National Association of Realtors reported a 3.7% drop in transactions on an annual basis, but a strong year-to-year gain and a record high in home prices, as supply remains limited. Ahead of the new home sales report, the futures are pointing to a slightly higher start for Wall Street this morning when trading resumes.
In addition, yesterday also saw the release of encouraging news on the unemployment front, as first-time jobless filings fell unexpectedly in the latest seven-day stretch declining to 547,000--the lowest total since the pandemic began last spring. Moreover, the Leading Economic Indicators surged in March according to data issued yesterday, rising by 1.3%, or better than the 1.0% increase forecast. In February, the LEI had dipped slightly. On balance, we seem to be in a solid economic recovery at this time.

But the economy was not the big story yesterday. Neither were the latest earnings reports, although the issuances from some companies did result in notable price moves. On point, high-yielding AT&T (T) saw its stock move up on better-than-forecast earnings Also, Chipotle Mexican Grill (CMG) beat the consensus on earnings, but that stock eased in price, as did shares of appliance maker Whirlpool (WHR) on a profit beat. Overall, it was a weak session for the stock market. But this morning, shares of Boston Beer (SAM) are set to rise on a solid issuance. However, chipmaker Intel (INTC) could see an opening dip, even though its results beat expectations. 

What did change the needle, though, it was a report that the Biden Administration was mulling a substantial increase in capital gains taxes on the wealthy that hurt market sentiment. The possible increase in such levies would be designed to fund some of the increased spending initiatives likely to be proposed by the President. This morning, though, traders seem to be looking past the possibility of higher taxes. 

As for the stock market, the fear of higher taxes drove stocks down sharply yesterday, with the Dow  Industrial Average down by 321 points; the S&P 00 Index off by 38 points, and the NASDAQ lower by 131 points. Losses were across the board. In fact, even a slight dip in Treasury note yields, to 1.55% on the 10-year instrument was not enough to dissuade the bears for one day at least.  - Harvey S. Katz, CFA

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.