The market opened just off its latest highs on Tuesday as stocks that should benefit from President Joe Biden’s $2 trillion infrastructure proposal continue to outperform, all while investors brace themselves for the start of first-quarter earnings season next week, which should provide much-needed clarity on corporate America’s impending recovery.
Shortly after the market open, the Dow Jones Industrial Average and S&P 500, which both closed at record highs Monday, ticked down about 0.1% each, while the tech-heavy Nasdaq, which has underperformed in recent weeks, climbed 0.1%.
Many of the firms leading the market Tuesday are those that should get a boost from the impending economic reopening and new infrastructure spending, with manufacturing company Masco, banking giant Truist Financial and Alaska Air Group all climbing roughly 2%.
Oil prices are also on the rebound as suppliers ramp up production in anticipation of heightened travel, boosting the price of U.S. oil benchmark West Texas Intermediate by 1.5% Monday and lifting stocks like Marathon Oil and Royal Dutch Shell by 1.5% and 3%, respectively.
Meanwhile, Oracle shares are down 1% after the firm lost its copyright infringement suit against Google, with the Supreme Court ruling Monday that Google’s use of Oracle’s Java program to build parts of its Android platform “constituted fair use.”
Another sign investors are bullish about Biden’s infrastructure plan: the Russell 2000, a benchmark of small-cap stocks that tend to do well during periods of increased government expenditure, is outperforming the market Monday, climbing 1%.
“The U.S. economy’s recovery from the pandemic continues to surpass expectations, aided by the accelerating vaccine distribution, massive stimulus and America’s desire to resume some semblance of normal daily life,” Ryan Detrick, the chief market strategist for LPL Financial, said in a Tuesday note. Detrick forecasts the nation’s gross domestic product will rise by about 6.5%—compared to about 5.8% worldwide—but he expects the S&P will remain virtually flat through year’s end as a result of higher interest rates (spurred by the nation’s massive stimulus spending) stunting earnings growth.
What To Watch For
First-quarter earnings season kicks off next week, with big banks JPMorgan, Citigroup and Bank of America all set to report starting Wednesday. Financials have been a big beneficiary of fiscal spending and relaxed Federal Reserve policy, climbing 17% this year while the broader market is up 10%.
In a sign of the market’s unprecedented frothiness, Credit Suisse announced Tuesday it will take a $4.7 billion hit due to the collapse of investment firm Archegos Capital Management, which defaulted on highly leveraged margin calls in late March and triggered a $30 billion firesale of stocks.
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