US market: Infrastructure plan in focus - what does it mean?
Market on the eve
On March 31, American stock exchanges finished trading mostly in the red zone. The S&P 500 fell 0.32% to 3959 points, the Dow Jones fell 0.31%, the NASDAQ lost 0.11%. The strongest dynamics was demonstrated by the sectors of cyclical consumer goods (+ 0.75%) and finance (+ 0.71%), again turning investors' attention to growing Treasury yields. The leader in decline was the non-cyclical consumer goods sector (-1.14%), neutralizing growth at the beginning of the week.
BioNTech (NASDAQ: BNTX: + 8.9%) and Pfizer (NYSE: PFE) raised their 2021 vaccine production forecast by 25% to 2.5 billion doses. According to BioNTech's management, there is still room for further growth.
Wells Fargo (NYSE: WFC: + 2.5%) said the bank did not suffer losses in connection with the liquidation of Archegos positions.
The FTC has not approved genetic sequencing solutions provider Illumina (NASDAQ: ILMN: -6.6%) to take over its $ 7.1 billion Grail spin-out.
Global stock markets are showing mixed dynamics. Today, investors will focus on President Biden's speech, which will present the first part of the infrastructure spending plan. According to various estimates, the volume of this package could range from $ 3 to $ 4 trillion, including $ 650 billion in investments in transport infrastructure, $ 500 billion in care facilities for the elderly and disabled, $ 300 billion each for housing infrastructure and the revival of production in the United States, as well as appropriations to support power grids, introduce nationwide broadband, and modernize the water supply system.
The main threat to the market in connection with the implementation of this plan is a possible tax hike, estimates of which have increased from $ 1 to $ 3 trillion. At the same time, it is expected that Biden will not resort to an increase in the "wealth" tax. The main task of the president is to secure enough Democratic support to re-use the reconciliation this year.
Asian stock markets closed in the red. China's Shanghai Shenzhen CSI 300 dropped 0.91%, Japan's Nikkei 225 fell 0.86%, and Hong Kong's Hang Seng lost 0.64%. The European Euro Stoxx 50 is down 0.17%.
Risk appetite is confident. The 10-year Treasury rate is being held above 1.72%. Brent crude oil futures remain at $ 64. Gold drops to $ 1684. The Russell 2000 Small Cap Index rose 1.72%.
We expect that the upcoming S&P 500 session will be held in the range of 3920-3970 points.
Economic news and macro statistics
The ADP employment report will be released on March 31st. The consensus forecast assumes that the number of new jobs will rise to 500 thousand compared to 117 thousand a month earlier.
Walgreens Boots Alliance (NASDAQ: WBA) will publish its quarterly report today, March 31st. Investors expect revenue to rise 1.9% YoY to $ 36.5 billion, with non-GAAP EPS falling 25.6% to $ 1.13. The investment community assesses the prospect of selling part of the company's wholesale business positively: despite a possible decrease in total revenue, focusing the business on the retail segment can increase the efficiency of operating activities in 2021.
The company entered into competition with the pharmaceutical business Amazon (NASDAQ: AMZN) by offering express delivery services to US customers through the Instacart and Instacart Express programs. Analysts point to the potential for revenue growth for Walgreens Boots due to the spread of the COVID-19 vaccine. As of the end of February, the company had delivered 5 million vaccines to 43 states.
The Freedom Finance Sentiment Index remained at 66 out of 100, still reflecting market participants' hope for a global economic recovery in 2021. However, concerns about a new wave of COVID-19 in Europe are having a negative impact on investor sentiment.
Technically, the S&P 500 is still in an uptrend. Short-term momentum after the rebound from the 50-day moving average has not been continued this week. The strength of the medium-term upward movement is waning, although the MACD continues to indicate that the bulls' advantage remains. Bearish divergence in the RSI provides a short-term tendency for the broad market index to retrace.