European and US stock futures are trading somewhat flat as traders mark the end of another stellar month and quarter. Wall Street is high on stimulus and this resulted in a solid March. The S&P 500 advanced 4.3%, while the Dow Jones jumped 6.6% during March, and this marked its best performance since November last year. Overall, the quarter was more favourable for recovery stocks and cyclical sectors, and they logged a decent performance.
Yesterday, after a long time, we saw the money flowing back into tech stocks and the sector outperformed industrial and construction. Apple, Microsoft, Netflix and Tesla helped the tech sector yesterday
Biden’s Second Bazooka
President Joe Biden released the economic recovery proposal of $2 trillion yesterday, and the US markets reacted positively to this new stimulus proposal. There is no doubt that these markets are addicted to stimulus, and any news which has stimulus inside it, is welcomed by market players with open arms.
One of the fears among investors and traders was that President Biden’s new stimulus proposal may derail the confidence among investors because of higher tax rates. Well, we did see the corporate tax rates moving to the upside in Biden’s plan, from 21% to 28% along with new measures which will prevent corporates offshoring their profit. The reason that traders didn’t adversely react to higher tax rates is because the increase in tax rate is still below the previous high.
Overall, investors are largely buying the vision that Biden represented to them. They do believe that the current stimulus package which is geared to improve US transportation infrastructure, water systems, and other internet related infrastructure will improve the economy not only in the short term but also in the long term as well.
This was the second major investment announcement that Biden made since he became the president. It is true that Democrats control both chambers of Congress, but their majority is by only a narrow margin.
So, it is important to keep in mind that while Democrats may support all the infrastructure spending such as building new bridges, airports and upgrade of internet infrastructure, the Republicans aren’t likely to nod their heads for a tax hike. Remember, It was Republicans who brought the corporate tax rate lower during the Trump administration.
So, the next few weeks are going to be very important for markets, and market players will be assessing the progress very closely. But for now, it is enough for the markets that there is more help on the way.
Yesterday, we had the US ADP number which confirmed that companies added 517K jobs for the month, and the pace of hiring was the fastest since September 2020. Although the number was really decent, especially when we compare it to the previous month’s reading of 176K, the fact is that the actual number fell short of expectations of 525K.
Nonetheless, the data has set a positive tone for the most important number which is due on Friday—the US NFP. The expectations are 630K jobs and the unemployment rate could tick lower to 6% from its weekly reading of 6.2%
As for today, we have the US Weekly Jobless Claims number which is due at 13:30 BST. Last week, this number wasn’t overwhelming. The forecast for today is 678K, while the previous reading was at 684K.