The S&P 500 Reaches New Highs as Infrastructure Plan is Unveiled along with Increase to Corporate Tax Rates.

Market Recap Week ending 4.2.21

‍

The holiday-shortened week was a busy one and brought new all-time highs for the S&P 500, which traded above the 4000 threshold for the first time. For the week, the S&P 500 gained 1.14%, the Dow added 0.24%, the NASDAQ rose 2.6%, and the Russell 2000 moved 1.46% higher.  The 2-year note yield increased by one basis point to 0.15%, and the 10-year bond yield fell seven basis points to close at 1.68%.  Gold prices were little changed, losing $4 to $1728.50 an Oz.  Oil prices were also little changed on the week, with WTI closing up $0.42 to $61.41a barrel.  Of note, the OPEC plus meeting called for an increase in output starting in May and lasting until July. 

‍

Investors started the week with concerns regarding exposure to the forced liquidation of Archegos Capital Management.  The margin call induced liquidation of nearly 20 billion in stocks created extreme price moves in specific equities and, in the end, substantial losses for investment bank counterparties, Credit Suisse and Nomura. 

‍

In Washington, the Biden administration unveiled the much anticipated 2.3 trillion-dollar infrastructure plan.  The plan calls for spending on bricks and mortar projects like roads, bridges, and transit systems. R&D spending on technology, money earmarked to secure US supply chains, and the restoration of schools, federal buildings, and veteran’s hospitals. The plan also includes green spending initiatives and high-speed internet expansion.  The spending measure will in part be funded by a proposed increase in the corporate tax rate from 21% to 28%.  Undoubtedly the proposal will morph into several separate initiatives and be met with strong opposition.  

‍

Economic data continued to show signs of recovery.  March Consumer Confidence came in at 109.7 versus expectations of 97 and well above the February reading of 90.4.  ISM Manufacturing showed the 10th consecutive month of expansion and the highest level in nearly 30 years, coming in at 64.47.  The Chicago PMI also had a strong showing coming in at 66.3 versus the consensus estimate of 60.  Initial claims regressed from the prior week showing an increase of 61k to 719k.  Continuing claims fell 46k to 3.79 million.  The Employment Situation report showed that 916k non-farm payrolls were created and that the unemployment rate fell to 6% from 6.2%.  The Leisure and Hospitality sector provided the bulk of these job gains.