U.S. stock futures flat to slightly higher to kick off second quarter

Read: The Dow just beat the Nasdaq by the widest margin in a month since 2002. Here’s how stocks tend to perform afterward

What’s driving the market?

President Joe Biden late Wednesday afternoon delivered a speech detailing his $2.3 trillion infrastructure plan. The package is offset by tax hikes, including a rise in the corporate tax rate to 28% from 21%, an increase in the global minimum tax on U.S. multinational companies, the establishment of what’s called a 15% minimum tax on book income, the elimination of tax preferences for fossil fuels and a ramp up in enforcement on corporations.

Analysts said the tech-led gains in Wednesday’s session showed much of the infrastructure package had largely been priced into the market. More cyclically sensitive stocks outpaced tech and other growth stocks in the first quarter as investors reacted to aggressive fiscal stimulus efforts that have fueled expectations for a near-term boom in economic growth and the potential for a sharp rise in inflationary pressures.

Although the infrastructure plan “is good news for the economy and it seems to be a supportive development for equities, it would be interesting to wait and see whether this will revive fears of an overheating economy,” said Charalambos Pissouros, senior market analyst at JFD Group, in a note.

“If so, this could lift U.S. Treasury yields higher and perhaps weigh again on equities,” he said, but added that a major selloff appeared unlikely given the Federal Reserve’s assurances on not seeking to pull back on its accommodative monetary policies.

Treasury yields, which rose sharply over the first quarter, have been calm this week. The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.721%
was down 1.2 basis points at 1.72%.

Investors will be keeping a close eye on developments on the tax front, analysts said.

“The larger impact to markets will be whether or not the corporate tax rate is raised to 28% — or somewhere in between there and the current 21% level — and whether or not a global minimum tax on corporations can be established,” said Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance, in emailed comments.

“It’s likely that the stock market can withstand a hike in the corporate tax rate to 25%, but unclear how much room there is above that if stocks are going to keep moving higher between now and year-end,” he said.

Investors get another taste of U.S. employment data ahead of Friday’s eagerly awaited March jobs report. Weekly figures on first-time applications for unemployment benefits are due at 8:30 a.m. Eastern. Initial claims are expected to fall to 675,000 in the week ended March 27 from 684,000 the previous week.

The IHS Markit U.S. manufacturing purchasing managers index for March is set for release at 9:45 a.m., followed by the more closely followed manufacturing index from the Institute for Supply Management. The PMI reading is expected to rise to 59.2 from 59.0 in February, while the ISM gauge is forecast to climb to 61.7% from 60.8%. For both gauges, a reading above 50 indicates growth in activity.

February construction-spending data is due for release at 10 a.m.

Which companies are in focus?

• Shares of Micron Technology Inc.
  MU,
  +1.93%
  were up 3.7% in premarket trade after the Boise, Idaho-based chip maker’s earnings and outlook topped Wall Street estimates.
• Separately, Micron and Western Digital Corp. are each exploring a potential deal for Kioxia Holdings Corp. that could value the Japanese semiconductor company at around $30 billion, The Wall Street Journal reported. Western Digital shares were up more than 2%.
• Dave & Buster’s Entertainment Inc.
  PLAY,
  +0.50%
  late Wednesday said its fourth quarter was “severely impacted” by the pandemic but swung to a narrower-than-expected quarterly loss and reported sales that came in above expectations. Shares edged lower.
• Johnson & Johnson Inc.
  JNJ,
  -0.40%
  on Wednesday acknowledged a batch of its COVID-19 vaccine produced by one of its manufacturing partners “did not meet quality standards,” and said it would provide more experts to oversee production. Johnson & Johnson shares were down more than 1%.
• Frontier Group Holdings Inc. the parent of low-cost carrier Frontier Airlines, said its initial public offering priced at $19 a share, the low end of a $19 to $21 price range.
• Residential real-estate brokerage Compass priced its initial public offering at $18, the low end of an already reduced range. Compass had cut its price range to an $18-$19 range from $23 to $26, and cut the number of shares on offer to 25 million from 36 million.