U.S. stocks rose on Wednesday led by technology shares as investors weighed the potential impact from President Joe Biden’s infrastructure spending plan.
The S&P 500 climbed 0.9%, hitting a fresh intraday record high. The tech-heavy Nasdaq Composite popped 2% as the jump in bond yields eased. Apple, Microsoft, Netflix and Facebook all gained at least 2%. Tesla popped 4.7%. The Dow Jones Industrial Average rose 50 points.
Biden will unveil a more than $2 trillion package in infrastructure spending on Wednesday. The plan would raise the corporate tax rate to 28% to fund it, an administration official told reporters Tuesday night. The White House said the tax hike, combined with measures designed to stop offshoring of profits, would fund the infrastructure plan within 15 years.
“Investors ‘sell the news’ of President Biden’s infrastructure plan and lean away from infrastructure beneficiaries — Energy, Materials, Industrials — and into the Tech-laden sectors that have been ‘beneficiaries’ of the pandemic,” said Chris Hussey, a managing director at Goldman Sachs. The bill “was largely in-line with expectations and is being met with indifference by stock markets that have perhaps pre-traded this spending for weeks already.”
Wednesday marks the end of March as well as the end of the quarter. Investors are bracing for volatile trading as pension funds and other big investors rebalance their portfolios.
The Dow and the S&P 500 are up 7% and 4.7%, respectively, month to date, on pace for their fourth positive month in five. For the quarter, the blue-chip Dow and the S&P 500 have risen 8% and 6.2%, respectively, on track for their fourth positive quarter in a row.
The Nasdaq has been the relative underperformer as technology stocks are especially sensitive to rising rates because they depend on borrowing money cheaply to invest in their future growth. For March, the tech-heavy benchmark is up less than 1%. For the quarter, it has gained 3%.
Some investors are concerned about the negative impact from higher corporate tax and a pickup in inflation amid massive fiscal stimulus.
“Economic stimulus is no longer 100% virtuous in the eyes of the market,” Tom Essaye, founder of Sevens Report, said in a note. “That’s because it will bring with it 1) Higher yields, 2) Rising inflation expectations and 3) Erosion of the idea that the Fed will be on hold for the entirety of 2021. Additionally, all this stimulus is being used to offset and usher in tax increases on individuals, corporations and investments.”
The major averages were pressured Tuesday by rising interest rates, as the U.S. 10-year Treasury yield notched a 14-month high of 1.77%. Bond yields have been on the rise this year amid a strong Covid-19 vaccine rollout and expectations of a broad economic recovery. The benchmark rate last traded flat at 1.73%.
Private payrolls in March expanded at the fastest pace since September 2020 with companies adding 517,000 workers for the month, according to a report Wednesday from payroll processing firm ADP. It was a healthy spike from the 176,000 in February though just below the 525,000 Dow Jones estimate.
Investors await the key March jobs report on Friday to assess the state of the labor-market recovery. Economists expect 630,000 jobs were added in March, and the unemployment rate fell to 6% from 6.2%, according to Dow Jones.
— CNBC’s Michael Bloom contributed reporting.
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