US equities mostly higher as Biden to unveil spending boost
US stocks moved mostly higher on Wednesday ahead of President Joe Biden unveiling a $2 trillion infrastructure spending plan, while shares were on the back foot elsewhere.
The blue-chip Dow slipped into negative territory as the morning wore on but both the S&P 500 and Nasdaq Composite were up in anticipation of Biden administration plans to hike the corporate tax rate from 21 to 28 percent to partially pay for the additional spending.
“The issue now is that the administration apparently wants to pay for more of the programme with higher taxes instead of just borrowing, and that has a chance to eventually take a bite out of earnings,” said market strategist JJ Kinahan at TD Ameritrade.
“It’s way too soon to talk about the tax impact in too much detail, but analysts do say if corporate taxes rise, it’s something to potentially worry about in 2022, not 2021,” he added.
The advance in the broader US equity indices also comes despite stubborn concerns that stimulus cash and pent-up consumer demand could stoke inflationary pressures and in turn force central banks to hike interest rates.
The has seen equity prices occasionally hit by losses in recent weeks as investors reevaluate the prospects higher interest rates may have on businesses.
The issue has reached a point where dealers are spooked by good news, with the possibility of more government spending forcing benchmark 10-year US Treasury yields — a gauge of future borrowing costs — to almost double since the turn of the year.
Eyes will remain on US bond yields when Biden unveils the details of the infrastructure plan later on Wednesday.
“Today’s key event will be the unveiling of Biden’s infrastructure plan – another bold move by the US President,” said OANDA analyst Sophie Griffiths.
“This comes hot on the heels of the recently approved $1.9-trillion stimulus plan, further bolstering expectations for a strong US economic recovery,” she added.
Elsewhere, world oil prices were mixed as traders adopted a wait-and-see approach on the eve of Thursday’s OPEC oil output meeting.
Markets also digested a US private-sector employment report from payroll services firm ADP, which showed a boost in hiring last month, before Friday’s key non-farm payrolls data that will provide a crucial health-check on the US economy.
London stocks shed 0.9 percent as investors also tracked a badly-received £7.6-billion ($10.4 billion, 8.9 billion euros) flotation for UK app-driven food delivery service Deliveroo.
Deliveroo, which has boomed on strong demand from locked-down consumers, saw the run-up to its initial public offering plagued by criticism of its business model that relies on using freelance labour.
“This lack of confidence in the business model has quickly been reflected in a disastrous first day of trading for the newly listed company, that saw the shares slide over 30% in the first 15 minutes of trading, before trading was halted,” said market analyst Michael Hewson at CMC Markets UK.
“If today’s price action is any indication of investor enthusiasm on the likes of profitability, cash flow and growth prospects, as we head towards an economic reopening, then today’s weakness could well be a warning sign,” he added.
Elsewhere in Europe, Paris stocks shed 0.3 percent and Frankfurt rallied at the end of the day to finish flat.
Asian stocks ended lower.
The dollar held close to a one-year yen high as a widely-expected surge in global economic growth sees money move out of the safe-haven Japanese unit.
– Key figures around 1530 GMT –
New York – Dow: DOWN less than 0.1 percent at 33,044.60 points
EURO STOXX 50: DOWN less than 0.1 percent at 3,922.73
London – FTSE 100: DOWN 0.9 percent at 6,713.63 (close)
Paris – CAC 40: DOWN 0.3 percent at 6,067.23 (close)
Frankfurt – DAX 30: FLAT at 15,008.34 (close)
Tokyo – Nikkei 225: DOWN 0.9 percent at 29,178.80 (close)
Hong Kong – Hang Seng: DOWN 0.7 percent at 28,378.35 (close)
Shanghai – Composite: DOWN 0.4 percent at 3,441.91 (close)
Dollar/yen: UP at 110. yen from 110.36 yen at 2100 GMT
Euro/dollar: DOWN at $1.1728 from $1.1764
Pound/dollar: UP at $1.3776 from $1.3765
Euro/pound: DOWN at 85.21 pence from 85.44 pence
West Texas Intermediate: UP 0.9 percent at $61.09 per barrel
Brent North Sea crude: DOWN 0.3 percent at $63.93 per barrel