By Will Horner
U.S. stocks rose Wednesday as investors awaited the rollout of President Biden‘s multitrillion dollar spending program and details on how taxpayers will fund it.
Mr. Biden is expected to roll out his ambitious $2 trillion program targeting infrastructure, green energy, manufacturing and housing on Wednesday. The fresh spending could give the economy another boost, coming on top of the recent $1.9 trillion stimulus program.
The program “is needed because we have been through a huge economic shock,” said Jane Shoemake, a portfolio manager at Janus Henderson Investors. “We have got to rejuvenate these economies and we have got to get them moving again.”
But money managers are also nervous because the president has signaled that he plans to fund the program in part by charging the highest-earning Americans the biggest tax rates they have faced in years. He also aims to raise corporation tax and hike levies on foreign earnings.
“There is a recognition that this is going to have to be paid for at some point: tax rises are likely at some point,” Ms. Shoemake said.
The latest economic data brought good news. ADP estimated that 517,000 private-sector jobs were created in March, the most in six months, with most coming in the battered services sector as businesses open back up and more Americans get a coronavirus vaccine.
In bond markets, the yield on the benchmark 10-year Treasury note was relatively flat, down to 1.719%, compared with 1.724% on Tuesday.
Investors have been selling government bonds in anticipation that a sharp economic rebound will be accompanied by higher inflation, possibly for a protracted period. The yield, which moves inversely to prices, climbed as high as 1.77% Tuesday.
“People have anticipated the growth story and anticipated what they think will be the inflationary consequence of the recovery and the fiscal stimulus,” said Willem Sels, global chief investment officer at HSBC Private Bank. “Now unfortunately, we just need to wait to see how high that inflation will peak, and we might be stuck in a volatile holding pattern until we get that data.”
The recent sharp moves higher on bond yields has led to nervousness among money managers and choppy trading sessions in recent weeks.
Still, fresh stimulus spending from the government, combined with the Federal Reserve’s pledge to keep easy monetary policies in place for the foreseeable future, have left the S&P 500 on track for its second month of gains. Investors are girding for a more challenging year ahead.
“There are pockets of the market that still look really good value, and there are some other parts of the market that look very, very frothy to me,” Ms. Shoemake said. “Markets are going to be volatile and there is going to be a lot of noise.”
In overseas markets, the Stoxx Europe 600 was flat. Credit Suisse fell a further 3.7% amid continuing concern about the fallout from the Swiss bank’s dealings with Archegos Capital Management.
Most major Asian stocks indexes declined. Japan’s Nikkei 225 retreated 0.9%, while the Hang Seng dropped 0.7%. The Shanghai Composite Index fell 0.4%.
Write to Will Horner at [email protected] Zoom.com
(END) Dow Jones Newswires
March 31, 2021 10:17 ET (14:17 GMT)
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