NYSE trader Gregory Rowe works on the floor of the New York Stock Exchange at the end of the trading day.

US stocks closed higher on the last trading day of the week as strong economic data outweighed investors’ fears of the capital gains tax hike proposed by President Joe Biden that would nearly double the tax rate for wealthy Americans.

All three major stock indexes rose Friday propelled by the two popular gauges of business activity that swung even higher in preliminary April readings, according to analytics firm IHS Markit.

The services activity index leaped to 63.1 from 60.4 – the fastest expansion since data collection began in 2009. The firm’s manufacturing index rose to 60.6 from 59.1, which is also a record. Markit’s composite index soared to an all-time high of 62.2 from 59.7. Readings above 50 indicate sector growth, while those below 50 signal contraction.

Ryan Detrick, chief market strategist at LPL Financial, said he was surprised by the market’s reaction to Biden’s proposal. He said investors should have expected it when Biden won.

“Calmer heads are prevailing today with the broad rally at least,” he said in a note. “On the surface, you’d think higher taxes wouldn’t be a good thing, but that’s actually not reality. In fact, the past two times we had an increase in the capital gains tax stocks did really well for the next six months in 1987 and 2013.”

Friday’s gains are a sharp rebound from Thursday’s drop when the markets were spooked after the capital gains tax hike was announced.

“The knee-jerk reaction to yesterday’s news that the Biden administration was interested in almost doubling the capital gains rate was a small selloff in the market,” Chris Zaccarelli, CIO at Independent Advisor Alliance, said in a note. “If the tax increase was actually implemented – as compared to just proposed – the selloff would have been greater.”

Zaccarelli added that the monetary and fiscal stimulus in the system should outweigh concerns

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