MW UPDATE: S&P 500 edges to all-time high as economy recovers and investors weigh infrastructure plan
By Mark DeCambre and William Watts
The S&P 500 edged to an intraday record Tuesday 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?
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.
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 report ed. Manchin's stance suggests that infrastructure's passage could still face challenges within its own party despite the use of the reconciliation procedure.
"The public wants to hike taxes on the very wealthy and large corporations, but Biden's proposal is likely to face a major haircut during negotiations this spring," said Greg Valliere, chief U.S. policy strategist at AGF Investments, in a note.
Biden "may get some tax increases, maybe half of what progressives want; the markets can probably can live with that outcome," he said.
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 three pillars of the stock market record highs are ultraloose monetary policy, fiscal support and the proof of the pudding: economic recovery," wrote Neil Wilson, chief market analyst at Markets.com.
"[Federal Reserve Chairman] Jay Powell has (for now) put the doubters about point one to bed, whilst Biden's Covid relief package and infrastructure bill are more than delivering on point two (and partially point three) by pumping somewhere in the region of 20% of US GDP into the system," he said.
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 counselor, 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 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?
What are other markets doing?
-Mark DeCambre; 415-439-6400; AskNewswires@dowjones.com
$(END)$ Dow Jones Newswires
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