Stocks ended lower on Thursday as investors digested a better-than-expected prints on the labor market, as well as a report that President Joe Biden would be open to revising his proposal to increase the corporate tax rate.
The Washington Post reported that Biden was reconsidering his previous proposal to raise the corporate tax rate to 28% from 21%, which had been seen as a major roadblock to winning Republican support for his infrastructure plans. Instead, he would recommend a minimum corporate tax rate of 15%, according to the news outlet.
Meanwhile, investors considered a handful of stronger-than-expected reports on the state of the labor market in the U.S. ADP posted its closely watched report on private payroll changes for May Thursday morning, which showed a better than expected 978,000 jobs were added back last month versus the 650,000 expected. And the Labor Department’s report on new weekly unemployment claims showed that new filings broke below 400,000 for the first time since March 2020, with fewer individuals becoming newly unemployed as more areas of the economy reopen.
Both reports set the stage for the Labor Department’s May jobs report out Friday morning, which will be instrumental in determining the strength of the economic recovery and suggesting whether the Federal Reserve might soon be due to taper its crisis-era asset purchase program. April’s sharply disappointing jobs report – with a paltry 266,000 jobs added back while 1 million had been expected – served as fuel for the Fed to stay on hold with current policies. But this stance could be undercut by a marked improvement in data, some pundits noted.
“The May employment numbers are really very important,” Steven Blitz, TS Lombard U.S. economist, told Yahoo Finance. “That’s really going to set in the market’s mind whether or not the Fed announces a taper at the end of July or whether it’s at some later date.”
Other pockets of the market have also garnered considerable attention. The so-called “meme stocks,” or stocks that have become popular on the Reddit forum r/wallstreetbets, gave back gains in early trading after rallying strongly on Wednesday. Shares of AMC Entertainment Holdings (AMC) recovered losses after sinking earlier in the day, following an announcement that the company planned to sell another nearly 12 million shares. The resurgence in retail investor interest also lifted shares of other meme stocks including Naked Brand Group (NAKD) and BlackBerry (BB).
“I don’t know if it’s so much a threat to the market. It’s more of a learnings experience,” Ryan Nauman, Zephyr market strategist, told Yahoo Finance of the recent surge in meme stocks. “This is no longer our grandparents’ or our parents’ stock market. Now, investment professionals, they might need to start looking at alternative data sets, rethinking their investment theses to consider this growing cohort of retail investors.”
