After a selloff on Thursday, Wall Street regained momentum on Friday as investors' concerns over a big hike in capital gains tax eased.
On Friday afternoon, the S&P 500 was trading at 4,183.10, up 1.16% for the day, while the Dow Jones was trading at 34,046, up 0.68%. The Nasdaq Composite was trading at 14,029, up 1.52% for the day as tech stocks regained their momentum.
Apparently, investors had time to realize that the prospect of 43% capital tax gains wasn't something new, and it wasn't a forgone conclusion either. Proposed policy changes have a long way to go before they become laws, and they are usually watered down from their early versions.
But there were a couple more things that helped Friday's rally. One of them was the digestion of good news on the U.S. economy released yesterday, which showed the labor market is improving as prospects for future growth are getting better.
Then there were steady U.S. Treasury bond yields supported by an announcement from the European Central Bank that it will continue its accommodating monetary policy, prompting traders and investors to look for higher yields in the U.S. The 10-year Treasury bond was trading at 1.56%, up 0.38% for the day.
Equity markets have been concerned that a stronger U.S. economy will fuel inflation and higher bond yields. But that doesn't seem to be the case as the rest of the world is still dealing with rising infections and lockdowns, which delay their own recoveries.
Meanwhile, U.S. stocks got another boost from strong earnings from Teradata Corp. (TDC), Snap Inc. (SNAP, Financial) and Equifax Inc. (EFX), suggesting the earnings picture is brightening up as the economy recovers from the pandemic.
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