S&P 500 ends at record, stocks book 4th straight quarter of gains as Biden readies $2.3 trillion infrastructure pitch

What drove the market?

Rising technology shares helped lift the S&P 500 index to a new intraday trading record ahead of Biden’s planned speech to unveil the first part of his “Build Back Better” plan in Pittsburgh later Wednesday.

An outline of the proposal released by the White House detailed $2.3 trillion worth of infrastructure investments, with a focus on bolstering roads, airports, safe water supplies, greener technology and more. It would be offset by raising the tax on corporate income from 21% back to 28% after being cut in 2017 from 35% to 21%.

Read: Here’s what’s in the White House infrastructure spending and corporate tax hike plan

News reports said the size of the Biden plan could further rise to $4 trillion as additional parts are announced, offset by increases in tax rates on the wealthy and investors.

The tech sector rose 1.5% in afternoon trade, making it the top S&P 500 gainer, followed by consumer discretionary at 0.8%, according to FactSet data.

“It’s all about stimulus, stimulus, stimulus,” Kent Engelke, chief economic strategist at Capitol Securities Management, told MarketWatch. “Ultimately, it is going to be viewed as a bad word,” he said, but not likely until the economy overheats or corporate taxes are raised to offset the spending, hurting company profits.

Need to Know: Wall Street is pricing in $4 trillion of infrastructure spending. Here are the stocks that could benefit, according to Bank of America

However, Nicholas Colas, co-founder of DataTrek Research, said in a note that, “We have always been of the opinion that markets never believed President Trump’s corporate tax cuts would be permanent. Raising them to the old levels would therefore not change our bullish outlook.”

“Changes in individual tax rates, especially those related to capital gains, are another matter. Given the outstanding gains of the last few years, especially in speculative tech stocks, changes in cap gains would certainly cause taxable account selling with no near-term offset in demand,” he wrote.

The infrastructure plan comes less than a month after Congress passed a $1.9 trillion package of COVID relief spending. The fiscal stimulus has boosted inflation expectations, which have been cited as a cause of a bond-market selloff that has sent the yield on the 10-year Treasury note up about 84 basis points for the quarter, its highest quarterly gain since Dec. 2016. That’s put pressure on tech shares and other growth-oriented stocks.

Yields edged higher again Wednesday with the 10-year Treasury rate
TMUBMUSD10Y,
1.745%
advancing 2.5 basis points to a one-year high of 1.749%.

Peter Andersen, founder of Boston-based Andersen Capital Management, told MarketWatch he’s been “frustrated” watching the outsize hold that bond yield moves seem to have on stocks, especially in the face of what Andersen expects will be a healthy consumer-led rebound as vaccines roll out.

“In the short term we’re in for more volatility until market participants finally realize that the economic recovery is going to take its own path,” he said. “We’ve never experienced anything like this before so there are no rules of thumb about what should happen. The closest thing I can model is World War II.”

Andersen thinks any infrastructure spending is largely priced into stocks, but said, “I welcome the focus on the industrial sector. I think it’s a welcome shift away from distractions like Bitcoin, lockdown stocks, and space travel and I do think that sector deserves its day in the sun. It will give a little more balance and rationality to the market.”

In U.S. economic data Wednesday, payroll-processing company ADP showed private-sector payrolls jumped by 517,000 in March, in line with the 525,000 consensus forecast. It was the largest gain in six months. The government’s March jobs report, due Friday, is expected to show a surge in payrolls.

The Chicago purchasing managers index for March was at its highest in 2 1/2 years, but pending home sales slid 10.6% in February, the National Association of Realtors said.

Which companies were in focus?

• Shares of Walgreens Boots Alliance Inc.
  WBA,
  +3.62%
  advanced 3.6% after the pharmacy chain reported fiscal second-quarter results and raised its outlook for fiscal 2021.
• Lululemon Athletica Inc.
  LULU,
  -3.27%
  said late Tuesday that its direct-to-consumer sales nearly doubled in the fourth quarter, making up half of its total sales as the retailer topped Wall Street expectations for the quarter. Shares lost 3.3%.
• Shares of Deliveroo, the U.K. food delivery company backed by Amazon.com Inc.,
  AMZN,
  +1.27%
  slumped 26.3% after it made its highly-anticipated stock market debut on the London Stock Exchange.
• Goldman Sachs Inc.
  GS,
  -1.51%
  shares lost 1.5% after the bank said it would offer access to Bitcoin and other cryptocurrencies to wealthy investors.
• Pfizer Inc.
  PFE,
  +0.33%
  shares rose 0.3% and those of BioNTech SE
  BNTX,
  +4.55%
  added 4.6% after the companies said Wednesday that a Phase 3 trial of its COVID-19 vaccine in adolescents aged 12 to 15 showed 100% efficacy and robust antibody responses. 

How did other assets do?

• The ICE U.S. Dollar index
  DXY,
  -0.11%,
   a benchmark of the dollar’s value versus its major rivals, was down 0.1% at 93.23.
• The Stoxx Europe 600 index
  SXXP,
  -0.24%
   closed up 0.2%, while the U.K.’s FTSE 100
  UKX,
  -0.86%
   shed 0.9%. The Nikkei NIK closed up 0.9% lower, as did China’s CSI 300 index.
• The U.S. crude benchmark
  CL.1,
  -1.85%
   closed 2.3% lower at $59.16 a barrel on the New York Mercantile Exchange, but rose 22% for the quarter.
• Prices for gold futures
  GC00,
  +1.34%
   jumped 1.8% to settle at $1,713.80 an ounce, but slid 9.5% for the quarter, the worst since for the precious metal scine 2016.

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