Stocks were mixed Wednesday as details on President Joe Biden’s infrastructure-spending plan emerged.The broader market had a decent day as Investors bought up beaten-down growth stocks.
The
fell 85.41 points, or 0.26%, to close at 32,981.55. The
rose 14.34 points, or 0.36%, to end at 3,972.89, and the
surged 201.48 points, or 1.54% to close at 13,246.87. The biggest gainer in the S&P 500 was
(ticker: ENPH), an energy-management technology company that saw shares soar 7.7% on speculation the stock will benefit with infrastructure investments.
Biden’s plan calls for $2 trillion of fiscal spending, and would be partly financed by an increase in corporate taxes. The extent of the tax hike and subsequent impact on earnings is a minor concern for investors at present. The plan itself is a positive for employment and consumer spending, and direct beneficiaries of the projects would include companies in highway and transportation construction.
But optimism largely wasn’t reflected in relevant stocks Wednesday.
(CAT), for example, which makes heavy machinery for construction, saw shares fall 0.5%. Value stocks in general performed poorly, with the
ETF (VOOV) falling 0.5%. These stocks for the most part represent mature companies in their earnings prime, and are sensitive to perceived changes in the economy.
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Importantly, the infrastructure plan would span eight years, and the annual spend would be about $250 billion. Stock valuations already reflect powerful earnings momentum over the next several years, with the value ETF up 30% since the end of September. The economy is quickly emerging—and then some—from the pandemic. Trillions of dollars of fiscal stimulus is fueled that, and the infrastructure spending won’t interrupt that support.
“I just don’t think we have any surprises” in the details from Biden’s plan, Louis Navellier, founder of asset-management firm Navellier & Associates, told Barron’s.
The S&P 500 got a lift from growth stocks, the fortunes of which can rise fiercely in any current economic environment, as developing companies are marked for earning the bulk of their profits in the long term. Also, growth stocks have underperformed value since late September. The
ETF (VOOG) rose 1.3%.
Fund managers have recently been rebalancing into growth a bit. They are “reloading for next quarter,” said Navellier, who bought more
(PINS) stock Wednesday for clients. The social-media company—still scaling and expected to grow earnings at a 66% annual clip for the next few years, according to FactSet—saw shares rise 6.8% on the day.
When first-quarter earnings begin to roll in, Wall Street will eyeball them to get a read on fundamentals.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
