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The S&P 500 was trading near where it started on Tuesday, after the broad-based benchmark hit a record intraday high as investors weighed prospects for President Joe Biden’s $2.3 trillion infrastructure plan and a brightening outlook for the U.S. and global economy.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average
    DJIA,
    -0.16%
    was down 62.45 points, or 0.2%, at 33,464.74.
  • The S&P 500
    SPX,
    +0.05%
    was down 2.07 points, or less than 0.1%, at 4,075.84, after trading as high as 4,081.37, taking out the intraday record of 4,083.42 set on Monday.
  • The Nasdaq Composite
    COMP,
    +0.23%
    rose less than a point to 13,706.15.

On Monday, the Dow rose 373.98 points, or 1.1%, to 33,527.19, marking its 18th record close of 2021, while the S&P 500 index ended 58.04 points, or 1.4%, higher to a record close at 4,077.91. The Nasdaq Composite Index ended up 225.49 points, or 1.7%, at 13,705.59, off 2.8% from its Feb. 12 record close.

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What’s driving the market?

Amid evidence that the COVID rebound in the U.S. is under way, investors are focusing on the prospect of further fiscal support and increased corporate taxes.

“Market breadth hasn’t been this good in over a decade,” Edward Moya, Senior Market Analyst, The Americas, at OANDA noted.  “The S&P 500 has 95% of companies trending above their 200 day moving averages.”

“Earnings season is approaching, and Illumina’s preannouncement was taken as a good sign of things to come,” he added.  “If Illumina is a precursor of what to expect, this earnings season could see many companies tout a broad-based acceleration,” he said. 

The nonpartisan Senate parliamentarian on Monday ruled in favor of a Democratic effort to pass additional legislation through a process called reconciliation, which could pave the way for Democrats to approve President Joe Biden’s $2.3 trillion infrastructure bill.

However, Joe Manchin, Democratic Senator for West Virginia, said he wouldn’t support raising the corporate tax rate to 28% from 21% as proposed by Biden to fund the infrastructure package, Axios reported. Manchin’s stance suggests that infrastructure’s passage could still face challenges within its own party despite the use of the reconciliation procedure.

“With a watered down package, that tax increase gets maybe to 3% to 4%. I think the market can swallow that considering some of the upside from the economy recovery,” said Jack Janasiewicz, portfolio manager at Natixis Investment Managers, in an interview.

Analysts say the infrastructure plan is seen as a much-needed measure to rebuild aging U.S. roads, bridges, tunnels and airport, as well as invest in broadband internet, fortify power and water supplies, and prepare for climate change.

The International Monetary Fund on Tuesday raised its forecasts for U.S. and global economic growth. The IMF raised its U.S. outlook sharply in 2021 to 6.4% this year from 5.1%. The U.S. should see solid 4.4% growth in 2022.

The IMF raised its estimate for global growth to 6% this year and 4.4% next year. This represents an upgrade of 0.5% for 2021 and 0.2% for 2022 from what it forecast in January. Gita Gopinath, the IMF’s economic counsellor, said “a way out of this health and economic crisis is increasingly visible.”

Separately, details of the fallout from the implosion of Archegos Capital Manangement, run by Bill Hwang, who failed to meet margin calls after making highly leveraged bets on a handful of stocks, was still emerging. Credit Suisse Group AG
CS,
+0.30%
said it would take a $4.7 billion charge and a nearly $1 billion loss. The bank said it would cut its dividend and announced the departure of two executives Brian Chin, investment banking head, and chief risk and compliance officer Lara Warner.

On the data front, job openings in the U.S. jumped to 7.37 million in February from 7.1 million a month earlier, the Labor Department said. That’s the highest level in more than two years.

Which companies are in focus?
  • Shares of Illumina Inc. ILMN were in focus after the biotech company late Monday said it expects first-quarter revenue to top $1 billion thanks to “record” orders and revenue growth in its gene-sequencing and related businesses. Shares rose nearly 10%.
  • Novavax Inc. NVAX said late Monday that it plans to expand its COVID-19 vaccine trials to include children and teens by the second quarter. Shares were up 0.8%.
  • Shares of Opera Ltd.
    OPRA,
    +4.00%
     surged 3%, after the Norway-based web browser company said it expects first-quarter revenue to exceed previously provided guidance.
What are other markets doing?

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