Get ready for $178 billion of selling ahead of the capital-gains tax hike. These are the stocks most at risk. - MarketWatch

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Avid readers of this column may have had a sense of déjà vu on Thursday. Last month, a Need to Know column explored what would pay for President Joe Biden’s infrastructure spending — and quoted a former Biden aide, Evercore ISI analyst Sarah Bianchi, who said it would “probably include nearly doubling capital-gains taxes on those with income over $1 million.” Not that it was any state secret — the Biden campaign’s website suggested such a move too.

In any case, the stock market reacted negatively to the Bloomberg News report...

Avid readers of this column may have had a sense of déjà vu on Thursday. Last month, a Need to Know column explored what would pay for President Joe Biden’s infrastructure spending — and quoted a former Biden aide, Evercore ISI analyst Sarah Bianchi, who said it would “probably include nearly doubling capital-gains taxes on those with income over $1 million.” Not that it was any state secret — the Biden campaign’s website suggested such a move too.

In any case, the stock market reacted negatively to the Bloomberg News report that the White House was considering doubling capital-gains taxes on the wealthy to help pay for social spending, as the S&P 500 SPX dropped by the most in a month. The news was particularly jarring to the highflying cryptocurrency space, with bitcoin BTCUSD and ethereum ETHUSD slumping.

One question now is whether the closely divided Senate will go for it. “Frankly, I suspect that these proposed tax increases will be knocked down at the hands of Senator [Joe] Manchin who remains the ‘swing’ vote in the Senate,” said Louis Navellier, the chairman of Navellier & Associates. An alternative is that the Senate could increase the capital-gains tax, but by a smaller amount — analysts at Goldman Sachs suggest they’ll settle at 28%, up from 20% currently. Another question is whether the tax will be applied retroactively or not.

Analysts at Goldman Sachs — in October — ran the numbers on the stock market impact of previous capital-gains tax hikes. While there is only a modest impact on the stock market as a whole, momentum stocks usually get socked before they are levied, they found. That makes sense — investors logically are more motivated to sell the stocks where they would save the most by avoiding higher capital-gains taxes.

The last time capital-gains taxes were hiked, in 2013, the wealthiest households sold 1% of their equity assets, the Goldman analysts found. According to the Federal Reserve’s distributional financial account data, the top 1% held $17.79 trillion of equities and mutual funds in the fourth quarter of 2020 — so a 1% selling of stocks this time would be $178 billion. (The most recent Internal Revenue Service breakdown, from 2018, found that millionaires accounted for just over 500,000 filers, or about 0.4% of the total.)

Here is the list of the top price gainers in the S&P 500 and Nasdaq-100 over the last year and over the last five years.

S&P 500 and Nasdaq-100 gainers
Company	One-year % change	Company	Five-year % change
Penn National PENN	575	Enphase Energy ENPH	6160
L Brands LB	548	Etsy	2230
Caesars Entertainment CZR	527	Advanced Micro Devices AMD	1882
Tesla TSLA	392	NVIDIA NVDA	1538
Gap GPS	368	Tesla	1318
Freeport McMoran FCX	355	MercadoLibre MELI	1137
Enphase Energy	321	Paycom Software PAYC	943
Tapestry TPR	237	Atlassian Corp. TEAM	859
Etsy ETSY	235	Align Technology ALGN	733
Generac Holdings GNRC	233	Generac Holdings	720
Moderna MRNA	228	Micron Technology MU	695
Peloton Interactive PTON	226	Lam Research LRCX	662
Align Technology ALGN	224	ServiceNow NOW	650
News Corp NWSA	219	Zebra Technologies ZBRA	647
SVB Financial SIVB	210	Caesars Entertainment	645
Data: FactSet (News Corp owns MarketWatch, the publisher of this report.)

Intel and Mattel beat expectations

There were a few notable earnings released on Thursday night. Microchip maker Intel INTC easily beat earnings expectations and lifted its revenue guidance for the year, though investors focused on the declining revenue from the unit that produces chips for data centers. Toy maker Mattel MAT reported a smaller-than-forecast loss, as sales trounced estimates. Social-media service Snap SNAP broke even on better-than-expected revenue.

A Food and Drug Administration committee may recommend resuming the use of pharmaceutical Johnson & Johnson’s JNJ COVID-19 vaccine with a blood-clot warning, as European regulators have done. A Politico report said the White House has now largely written off the J&J shot, not just because of the blood-clot issue but also contamination issues.

The flash purchasing managers indexes and new home sales report highlight the economic releases. The eurozone flash PMI beat expectations, with the services component rising above the 50 mark indicating expansion for the first time since August.

Stock futures higher

U.S. stock futures ES00 NQ00 edged up after the sharp decline on Thursday. The yield on the 10-year Treasury BX:TMUBMUSD10Y was 1.55%.

Random reads

The launch of crew to the International Space Station was successful on Friday morning — here’s a profile of the four astronauts on board.

The Los Angeles Dodgers will set aside a “vaccinated only” section for Saturday’s baseball game.

A man used 80 pounds of explosives — for a gender-reveal party.

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Get ready for $178 billion of selling ahead of the capital-gains tax hike. These are the stocks most at risk. - MarketWatch
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