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Beyond the Numbers

Details Of Biden’s Infrastructure Plan May Generate Buying Interest
3/31/2021 8:55 AM

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to move back to the upside after ending the previous session modestly lower.

Early buying interest may be generated in reaction to the details of President Joe Biden’s infrastructure and economic recovery plan.

The plan calls for spending approximately $2 trillion over eight years, with the proposal including investments in transportation infrastructure and accelerating the transition to clean energy.

To pay for the plan, Biden has called for raising the corporate tax rate to 28 percent from 21 percent, which is likely to face intense opposition from Republican lawmakers.

A report from payroll processor ADP showing strong private sector job growth in the month of March may also generate some positive sentiment.

After coming under pressure early in the session, stocks regained ground over the course of the trading day on Tuesday. The major averages climbed well off their worst levels of the day but still closed in negative territory.

The Dow slid 104.41 points or 0.3 percent to 33,066.96, giving back ground after ending Monday’s trading at a record closing high. The Nasdaq edged down 14.25 points or 0.1 percent to 13,045.39 and the S&P 500 fell 12.54 points or 0.3 percent to 3,958.55.

The early weakness on Wall Street came as treasury yields extended the strong upward move seen on Monday, weighing on high-growth technology stocks.

The yield on the benchmark ten-year note climbed to its highest level in over a year amid optimism about the coronavirus vaccine rollouts and the economy reopening as well as President Joe Biden's soon to be announced infrastructure plan.

However, yields pulled back over the course of the trading day, leading to the subsequent recovery attempt by stocks on Wall Street.

In U.S. economic news, the Conference Board released a report showing consumer confidence skyrocketed by much more than anticipated in the month of March.

The Conference Board said its consumer confidence index spiked to 109.7 in March from a downwardly revised 90.4 in February.

Economists had expected the consumer confidence index to climb to 96.0 from the 91.3 originally reported for the previous month.

With the much bigger than expected increase, the consumer confidence index reached its highest level since the onset of the coronavirus pandemic in March of 2020.

Gold stocks showed a substantial move to the downside on the day, moving sharply lower along with the price of the precious metal. Reflecting the weakness in the sector, the NYSE Arca Gold Bugs Index tumbled by 3.8 percent.

Considerable weakness was also visible among networking stocks, as reflected by the 1.2 percent drop by the NYSE Arca Networking Index.

On the other hand, airline stocks moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 4.1 percent.

Banking stocks also showed a strong move to the upside on the day, resulting in a 2.1 percent jump by the KBW Bank Index.

Commodity, Currency Markets

Crude oil futures are slipping $0.11 to $60.44 a barrel after slumping $1.01 to $60.55 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,687.70, up $1.70 compared to the previous session’s close of $1,686. On Tuesday, gold plunged $28.60.

On the currency front, the U.S. dollar is trading at 110.75 yen compared to the 110.36 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1724 compared to yesterday’s $1.1717.

Asia

Asian stocks moved mostly lower during trading on Wednesday as traders weighed the impact of a surge in coronavirus cases around the world and waited for U.S. President Joe Biden's big announcement on infrastructure and other measures to support the economic recovery.

Chinese shares ended lower despite data pointing to a strong economic recovery. The benchmark Shanghai Composite Index dropped 14.76 points, or 0.4 percent, to 3,441.91, while Hong Kong's Hang Seng Index ended down 199.15 points, or 0.7 percent, at 28,378.35.

The manufacturing sector in China expanded at a faster rate in March, the National Bureau of Statistics said today, with a manufacturing PMI score of 51.9. That beat expectations for 51.0 and was up from 50.6 in February.

The NBS also said its non-manufacturing PMI came in at 56.3, up sharply from 51.4 in the previous month.

Japanese shares ended lower after two sessions of gains. The Nikkei 225 Index fell 253.90 points, or 0.9 percent, to 29,178.80 amid concerns about a possible fourth wave of coronavirus infections in the country. The broader Topix ended 1.2 percent lower at 1,954.

Market heavyweight SoftBank Group advanced 1.7 percent, while Uniqlo operator Fast Retailing gave up 1.1 percent. Automakers finished broadly higher, with Toyota Motor climbing over 3 percent. Banks Mizuho Financial, Sumitomo Mitsui Financial and Mitsubishi UFJ Financial lost 3-4 percent.

Industrial output in Japan fell a seasonally adjusted 2.1 percent sequentially month in February, official data showed. That was shy of expectations for a fall of 1.2 percent following the 4.3 percent jump in January.

On a yearly basis, industrial production shed 2.6 percent - roughly in line with expectations - after sinking 5.2 percent in the previous month.

Australian markets ended notably higher, with industrial and real estate stocks leading the surge. The benchmark S&P/ASX 200 Index climbed 52.30 points, or 0.8 percent, to 6,790.70, while the broader All Ordinaries Index ended up 47.20 points, or 0.7 percent, at 7,017.

Among the top gainers, Transurban Group gained 2.6 percent, Sydney Airport rallied 3.9 percent and Unibail-Rodamco-Westfield surged 6.4 percent.

Miners BHP and Rio Tinto rose about 1 percent, while banks eked out modest gains. Energy stocks ended broadly lower, though Origin Energy rose 1.7 percent.

Resolute Mining jumped 4.8 percent after the gold miner reaffirmed its full year guidance of producing up to 375,000 ounces of gold at a maximum cost of A$1,365 or US$1,275 per ounce.

In economic news, the total number of building permits issued in Australia rose a seasonally adjusted 21.6 percent sequentially in February, a government report showed.

Separately, central bank data revealed that private sector credit in Australia was up 0.2 percent month-on-month in February, unchanged from the January reading.

Seoul stocks ended lower as the bourse operator said that it would check on its regulations on stock short selling. The Kospi slipped 8.58 points, or 0.3 percent, to 3,061.42.

Industrial output in South Korea advanced a seasonally adjusted 4.3 percent month-on-month in February, Statistics Korea said. That beat forecasts for a decline of 0.1 percent.

Another report showed the value of retail sales in South Korea dropped a seasonally adjusted 0.8 percent sequentially in the month - missing forecasts for a decline of 0.3 percent.

A measure of business confidence in the country ticked higher in March, with the corresponding index rising to 89.0 from 82.0 in February.

Europe

European shares are modestly lower on Wednesday as investors digest upbeat Chinese data and await details of U.S. President Joe Biden's infrastructure plan.

The Washington Post reports the first part of Biden's infrastructure package could cost $2.25 trillion, with the focus on physical infrastructure, housing, clean energy and manufacturing, among other areas.

While the U.K.’s FTSE 100 Index is just below the unchanged line, the French CAC 40 Index and the German DAX Index are both down by 0.1 percent.

Credit Suisse shares have fallen, extending losses for a third day on worries about its losses linked to the downfall of Archegos Capital.

Swedish retailer H&M has also moved lower after reporting a quarterly loss and confirming it would not propose a dividend at its annual general meeting.

Deliveroo shares have slumped in their market debut as the takeaway delivery company faces criticism over its treatment of riders. Peer Just Eat Takeaway declined 1.6 percent.

Premium pubs and hotels business Fuller, Smith & Turner has also moved to the downside. The company said it expects full-year revenues in Managed Pubs and Hotels to be about 80 percent less than the previous year.

On the other hand, Capgemini shares have advanced. The business IT services provider has set new financial ambitions for the medium term.

Stratec SE, a manufacturer of automated analyzer systems, has also jumped after its fourth quarter earnings per share soared 76.1 percent.

In economic news, Eurozone consumer inflation advanced to 1.3 percent in March, in line with expectations, from 0.9 percent in February, flash data from Eurostat revealed. This was the third consecutive rise in prices.

France's consumer prices increased 1.1 percent year-on-year in March, faster than the 0.6 percent rise in February largely due by a rebound in energy prices, preliminary data from the statistical office Insee showed.

The rate came in line with economists' expectations and was the fastest since February 2020, when prices were up 1.4 percent.

U.K. GDP grew 1.3 percent sequentially in the fourth quarter instead of the 1.0 percent estimated initially, the Office for National Statistics said. The economy had expanded sharply by 16.9 percent in the third quarter.

Over the whole year of 2020, GDP contracted by 9.8 percent, slightly revised from the first estimate of a 9.9 percent decline. This was the biggest contraction on record.

U.S. Economic Reports

Partly reflecting a jump in employment in the leisure and hospitality sector, payroll processor ADP released a report on Wednesday showing strong private sector job growth in the month of March.

ADP said private sector employment surged up by 517,000 jobs in March after climbing by an upwardly revised 176,000 jobs in February.

Economists had expected employment to jump by 550,000 jobs compared to the addition of 117,000 jobs originally reported for the previous month.

The increase in private sector employment in March reflected the strongest job growth since the spike of 821,000 jobs seen last September.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of March.

The Chicago business barometer is expected to rise to 60.7 in March from 59.5 in February, with a reading above 50 indicating growth in regional business activity.

The National Association of Realtors is due to release its report on pending home sales in the month of February at 10 am ET. Economists expect pending home sales to tumble by 2.6 percent.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended March 26th.

Crude oil inventories are expected to inch up by 0.4 million barrels after rising by 1.9 million barrels in the previous week.

Atlanta Federal Reserve President Raphael Bostic is due to speak in a Zoom webinar on “Monetary Policy in a Pandemic” to the University of Miami Herbert Business School at 10:45 am ET.

Stocks In Focus

Shares of Chewy (CHWY) are moving sharply higher in pre-market trading after the online pet supplies retailer reported an unexpected fiscal fourth quarter profit on revenues that exceeded analyst estimates.

Drugstore operator Walgreens (WBA) may also move to the upside after reporting better than expected fiscal second quarter earnings and raising its full-year guidance.

Shares of Cleveland-Cliffs (CLF) are also seeing significant pre-market strength after the steel producer provided upbeat guidance for the first quarter and full year.

On the other hand, shares of BlackBerry (BB) may come under pressure after the communications software company reported fiscal fourth quarter earnings that matched estimates but weaker than expected revenues.
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