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Stocks Tumble on Tax-Hike Jitters

S&P 500, Dow Jones, Nasdaq declined sharply on Thursday.

The Dow and broader U.S. stock market tumbled on Thursday, as investors weighed speculation that the Biden administration was eyeing a hefty capital gains tax.

Wall Street’s major indices were lower at the close, with the Dow Jones Industrial Average (DIA) falling 322.20 points, or 0.9%, to 33,815.11.

The broad S&P 500 Index (SPY) of large-cap stocks declined 0.9% to close at 4,134.92. All 11 primary sectors reported losses, with materials leading the declines. Energy and information technology also fell sharply.

Meanwhile, the technology-focused Nasdaq Composite Index (QQQ) fell 0.9% to settle at 13,818.41.

A measure of implied volatility known as the CBOE VIX (VXX) rose sharply on Thursday.  The so-called “investor fear index” reached an intraday high of 19.90 on a scale of 1-100, where 20 represents the historical average. It would eventually settle up 7.5% at 18.84.

In commodities, oil prices edged higher on Thursday, with U.S. West Texas Intermediate futures rising 30 cents, or 0.5%, to $61.65 a barrel on the New York Mercantile Exchange. Brent, the international futures contract, gained 25 cents, or 0.4%, to $65.57 a barrel.

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In precious metals, gold prices pulled back on Thursday, as the June futures contract fell $10.60, or 0.6%, to $1,782.30 a troy ounce on the Comex division of the New York Mercantile Exchange. Silver futures tumbled 45 cents, or 1.7%, to $26.16 a troy ounce.

The Final Word: Markets came under pressure Thursday after Bloomberg News reported that the Biden administration was planning to increase the capital gains tax to as high as 39.6%, a sharp increase from the current 20%.