President Joe Biden is due to present his infrastructure spending plan on Wednesday, the opening salvo in getting legislation through Congress to fix crumbling roads and bridges.
Strategists at Bank of America led by Savita Subramanian say Wall Street already is starting to price in infrastructure spending that could reach $4 trillion. They say the ratio of the S&P 500’s
market cap to the M2 measure of money supply is an unusually high 1.7, compared with the average of 1.4 since the 2008 financial crisis.
There is also the downside as well, as the market reacts to likely corporate tax hikes and the rise in the 10-year Treasury
that lifts corporate debt expenses. “Infrastructure spending is spread out over years, but a corporate tax hike would hit immediately,” they say.
Industrials and materials will likely be the biggest beneficiaries of an infrastructure bill, along with U.S. small-caps, whose sales are highly correlated to U.S. capital spending cycles, the strategists say.
But which ones? The strategists screened S&P 500 companies, back to 1986, to find the highest sales growth sensitivity to the components of U.S. private nonresidential fixed investment.
For the highest sales sensitivity to nonresidential fixed investment in structures, it is a group led by pipeline owner Kinder Morgan
exchange operator Intercontinental Exchange
oil field equipment operator NOV
stock-exchange owner Nasdaq
and healthcare real-estate investment trust Ventas
For the highest sales sensitivity to technology equipment investment, it is pharmaceutical Incyte
microchip equipment maker Lam Research
electric utility Centerpoint Energy
cloud services company NetApp
and chip equipment maker Applied Materials
The highest sales sensitivity to industrial investment includes some of the same companies: Incyte, biotech Vertex Pharmaceuticals
home-energy technology maker Enphase Energy
and fertilizer maker CF Industries
The highest sales sensitivity to intellectual property investment were network services provider Akamai Technologies
travel services provider Booking Holdings
internet retailer Amazon.com
network equipment maker Juniper Networks
and network services firm F5 Networks
The strategists also looked at companies that would benefit from reshoring, which include paper and packaging firm WestRock
Ventas, CenterPoint Energy, high-tech lender SVB Financial
and natural-gas distributor Duke Energy
Waiting for Pittsburgh
Biden is due to deliver remarks in Pittsburgh on infrastructure spending shortly after trading ends, at 4:20 p.m. Eastern. The White House said what is called The American Jobs Plan will include $2 trillion in spending over 10 years and will be fully paid for with $2 trillion in taxes over 15 years, including by hiking the corporate tax rate to 28%, increasing the global minimum tax on U.S. multinationals and establishing what is called a 15% minimum tax on book income. Published reports say the White House will lay out plans for roughly $2 trillion more in spending on education and healthcare in a month’s time.
ADP said private-sector employment jumped by 517,000 in March. There’s data to come on the Chicago-area purchasing managers index and pending-home sales.
rose in premarket trade after UBS upgraded the iPhone maker to buy from neutral, citing hopes of a branded electric vehicle.
shares fell 6% after the security software provider reported weaker-than-expected revenue, which the company blamed on a delay in selling patent licenses.
Online food delivery company Deliveroo flopped in its first day of trading, with the Amazon-backed company sliding as much as 30% in London trade.
Rep. Matt Gaetz was the top trend on Google after the New York Times reported he is under investigation over a relationship with a 17-year-old.
Nasdaq 100 gains
Futures on the S&P 500
edged up while Nasdaq 100
futures posted stronger gains, after two straight declines for the S&P 500. The yield on the 10-year Treasury slipped to 1.72%.
A Tokyo bar has a stock market theme, with drinks named “Margin Call” and “Lehman Shock” and books on value investing.
The Mars rover took a stunning selfie.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.