Wednesday March 31st


Stock futures are flat as investors digest Biden’s infrastructure spending plan

U.S. stock index futures were modestly higher early Wednesday as investors weighed the potential impact from President Joe Biden’s infrastructure spending plan. Futures tied to the Dow Jones Industrial Average were flat. S&P 500 futures rose 0.2% while Nasdaq 100 futures climbed 0.7%. 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. “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.” 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 6.9% and 3.9%, 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 5.4%, 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 down 1.1%, on pace to break a four-month winning streak. For the quarter, it’s up 1.2%. 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. The stock market is closed for the Good Friday holiday. Shares in Asia-Pacific mostly declined on Wednesday as official data showed China’s factory activity growing in March. In Japan, the Nikkei 225 shed 0.86% to close at 29,178.80 while the Topix index declined 1.21% to end its trading day at 1,954. South Korea’s Kospi slipped 0.28% to finish its trading day at 3,061.42. Mainland Chinese stocks were lower by the afternoon, with the Shanghai composite down 0.43% to 3,441.91 and the Shenzhen component shedding 0.79% to 13,778.67. The Hang Seng index in Hong Kong dipped about 0.3%, as of its final hour of trading. Oil prices fell on Wednesday on concerns about the market’s recovery after OPEC and its allies lowered its 2021 demand growth forecast, although strong Chinese factory activities lent some support. Brent crude for May, which expires on Wednesday, fell 32 cents, or 0.5%, to $63.82 a barrel. The more active Brent contract for June was down 30 cents, or 0.5%, at $63.87 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 28 cents, or 0.5%, to $60.27 a barrel. Gold was on track for its biggest quarterly decline in more than four years on Wednesday, as elevated U.S. bond yields and a stronger dollar diminished the safe-haven bullion’s appeal. Spot gold was little changed at $1,685.03 per ounce by 0916 GMT, having earlier touched its lowest since March 8 at $1,677.61. U.S. gold futures were steady at $1,685. For the quarter, the metal is down more than 11% and is on track for its worst quarterly performance since end-December 2016. Gold is also headed for a third straight monthly decline.