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Market Snapshot: Dow, S&P 500 set to take a breather after record rises

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U.S. stocks on Tuesday looked likely to pause after the Dow industrials and the S&P 500 index ended at records in the first trading day after Easter, supported by evidence of a strong economic recovery from the coronavirus pandemic this year.

Investors may also be watching for an update later Tuesday on the global economic outlook from International Monetary Fund, as world reacts to vaccine distribution and fiscal and monetary support provided by European and U.S. governments amid the pandemic.

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How are stock benchmarks performing?

On Monday, the Dow
DJIA,
+1.13%

rose 373.98 points, or 1.1%, to 33,527.19, marking its 18 record close of 2021, the S&P 500 index
SPX,
+1.44%

ended 58.04 points, or 1.4%, higher to a record close at 4,077.91, while the Nasdaq Composite Index
COMP,
+1.67%

ended up 225.49 points, or 1.7%, at 13,705.59, off 2.8% from its Feb. 12 record close.

What’s driving the market?

Amid evidence that the COVID rebound in the U.S. is underway, investors are focusing on the prospect of further fiscal support and increased corporate taxes.

The nonpartisan Senate parliamentarian on 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 reports. Manchin’s stance suggests that infrastructure’s passage could still face challenges within its own party despite the use of the reconciliation procedure.

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 ultra-loose 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.

Looking outside the U.S., the IMF later Tuesday is expected to raise its forecasts for global economic growth in 2021 on the back of success with vaccines and trillions of dollars of economic support being doled out. In January, the IMF’s forecast for 2021 was for growth of 5.5%.

Separately, details of the fallout from the implosion of Archegos Capital Manangement, run by Bill Hwang, who failed to meet margin calls after making highly leveraged bets on a handful of stocks, was still emerging. Credit Suisse Group AG
CS,
+1.59%

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.

Which companies are in focus?
  • Shares of Illumina Inc. ILMN were in focus after the biotech company late Monday said it expects first-quarter revenue to top $1 billion thanks to “record” orders and revenue growth in its gene-sequencing and related businesses. 
  • Novavax Inc. NVAX said late Monday that it plans to expand its COVID-19 vaccine trials to include children and teens by the second quarter. 

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