- The Dow Jones closed at record highs and the S&P 500 held near record highs.
- There was a somewhat defensive bias, but the major indices ignored news about the Archegos Capital liquidation, rising yields and pandemic concerns.
- However, small-cap stocks took a hit amid concerns about rising Covid-19 cases, with Biden urging reopening efforts to halt.
Overall, it was a moderate session in the US stock markets on Monday, which is not surprising given risk events later in the week, including the end of the quarter and the announcement of Biden’s infrastructure package on Wednesday, the ISM manufacturing survey for March on Thursday, and employment data on Thursday. Friday (which is the holiday for Good Friday in the US). The S&P 500 ended the session modestly lower at 3,975, shedding 20 points from recently printed all-time highs. The Dow Jones Industrial Average managed to post a record close at 33,170, gaining 0.3% on the day, while the Nasdaq 100 posted a very modest 0.1% loss. The small cap underperformed with the Russell 2000 falling 2.8%. The CBOE volatility index (VIX) jumped 1.88 to 20.74.
Performance of the day
The main story in the US equity markets on Monday was the implosion of Archegos Capital Management. Shares of some banks that liked the fund (Credit Suisse and Deutsche Bank) took a hit, but the overall market seemed to ignore the news quite well. Stocks also managed to ignore what ended up being a fairly substantial rise in US government bond yields. 10-year yields ended the session up 5bps and back above 1.70%. To be fair, there was a somewhat defensive bias in equities, with utilities (+ 1.1%) and consumer staples (+ 1.0%) the two best performing sectors for the session.
The market commentator touted the anticipation of Biden’s management’s upcoming infrastructure-focused stimulus plan as boosting returns and helping to keep the stock market supported. Keep in mind that last week, the same market commentators were arguing that talking about the need for tax increases to fund infrastructure stimulus was bad for the stock market.
US President Joe Biden will unveil plans for the infrastructure bill on Wednesday. A Washington Post report said the initial draft of the proposal will involve $ 3 trillion in spending and $ 1 trillion in tax increases, but others expect the White House to push for a $ 4 trillion spending package combined with $ 3.5 trillion in tax increases. Separate reports suggest that the Biden administration will split the infrastructure package into two halves, the first, to be announced Wednesday, will focus on transportation. Reports also suggest that Biden may also announce actions on student debt this week.
Elsewhere, there is growing concern in the US over the recent rise in Covid-19 cases; President Biden called on states to pause their reopening efforts and called for caution given the risk that the country could still face a setback in the launch of the vaccine. Top officials at the US Center for Disease Control made a similar point.
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