NEW YORK: Wall Street stocks tumbled Thursday following reports the Biden administration is considering a tax hike on wealthy stock investors, while European equities rallied as the European Central Bank kept its stimulus taps wide open.
US indices rallied Wednesday, but have been under pressure most of the week amid concerns about lofty equity valuations and rising coronavirus infections in India and other countries.
But losses deepened Thursday following reports President Joe Biden is developing a plan to increase the tax rate on profits from stock transactions to 39.6% from 20% on people earning more than $1 million.
All three major US indices dropped 0.9%.
Any tax plan faces a long process on Capitol Hill before becoming a reality, but analysts said the reports indicate tax hikes are very much in the mix in Washington. Biden also called for an increase in corporate taxes to finance his $2 trillion infrastructure package.
"The market was reminded that this was a possibility and now this whole prospect of higher taxes is going to be sitting out there," said Briefing.com analyst Patrick O'Hare, adding that it also served as "an excuse to do some selling."
Earlier, Frankfurt stocks ended the day 0.8% higher and Paris climbed 0.9% following the ECB announcement.
ECB keeps taps open
As widely expected, the ECB kept its massive pandemic-fighting stimulus package in place as Europe's ailing economies are facing slow recoveries amid a resurgence of Covid cases and slow vaccination campaigns.
"European markets have been cheered by the continued dovish stance of the ECB and their decision to 'significantly' increase the pace of bond purchases for the second quarter," said Chris Beauchamp, chief market analyst at online trading platform IG.
"This has, unsurprisingly, put pressure on the euro, which has edged back against the US dollar, but overall the continued support for the eurozone economy has bolstered investor enthusiasm for eurozone assets," he added.
The euro traded at $1.2016, down from $1.2035 late on Wednesday.
Among individual companies, shares in Credit Suisse shed 2.1% after the Swiss banking giant suffered a first-quarter loss on fallout from the bankruptcies of British finance firm Greensill and US hedge fund Archegos.
Administrators overseeing Greensill's activities meanwhile declared its Australian parent group had entered liquidation.
Key figures around 2130 GMT
New York - Dow: DOWN 0.9% at 33,815.90 (close)
New York - S&P 500: DOWN 0.9% at 4,134.98 (close)
New York - Nasdaq: DOWN 0.9% at 13,818.41 (close)
London - FTSE 100: UP 0.6 at 6,938.24 (close)
Frankfurt - DAX 30: UP 0.8% at 15,320.52 (close)
Paris - CAC 40: UP 0.9% at 6,267.28 (close)
EURO STOXX 50: UP 1.0% at 4,014.80 (close)
Tokyo - Nikkei 225: UP 2.4% at 29,188.17 (close)
Hong Kong - Hang Seng Index: UP 0.5% at 28,755.34 (close)
Shanghai - Composite: DOWN 0.2% at 3,465.11 (close)
Euro/dollar: DOWN at $1.2016 from $1.2035
Pound/dollar: DOWN at $1.3840 from $1.3931
Euro/pound: UP at 86.78 pence from 86.39 pence
Dollar/yen: DOWN at 107.94 from 108.08 yen
Brent North Sea crude: UP 0.1% at $65.40 per barrel
West Texas Intermediate: UP 0.1% at $61.43 per barrel