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Indexes Fight to Break Even as Biden Unveils $3.5B Plan

Market indexes struggled in their attempt to bring about a second consecutive day of stock gains, and, except for the tech-heavy Nasdaq, were unable to pull it off today. The Dow, which was fighting along zero-balance much of the final hour of trading, finished dow -0.18%. The S&P 500 was right there, -0.16%. The Nasdaq did manage to close +0.13% higher on the day, but the Russell 2000 hit the closing bell -0.07%.

September, as we know, is traditionally a month of market volatility, coming as it does between summer vacation and back-to-school months and the Q4 holiday season. Two weeks out from the end of calendar Q3, we see stricter regulations in China hitting global markets — including U.S. indexes carrying Chinese stocks — hard, along with supply chain headaches continuing based on Covid-led factory shut-downs at home and abroad.

One good thing analysts see in these present supply chain disruptions is that, as demand remains strong, these are gains to be counted another day in the future. In fact, the set-up for calendar Q4 looks quite good from this perspective. However, as Zacks Director of Research Sheraz Mian says in yesterday’s all-important Earnings Trends feature, analysts are seeing a deceleration in quarterly earnings growth. Read the entire article here: Earnings Estimates Have Stopped Going Up

Today, we saw a mid-day speech from President Biden, once again introducing his infrastructure package plan with which he intends to sign upon passage through Congress. In the $3.5 trillion plan, middle and lower-income Americans would see lower healthcare premiums, payments toward child care assistance, and sustainable energy initiatives to combat climate change. The bill asks the country’s richest Americans, who make north of $400K per year, to pay mote in income tax.

Specific proposals include a top tax rate increasing to 26.5%, a top marginal tax rate of 39.6%, and a top capital gains rate of 25%. The bill also boosts taxes on overseas earnings and taxes sales of cryptocurrency equities. Further, Biden intends to enforce tax laws already on the books, where citizens looking for ways to evade the current tax code would be compelled to pay what they are due, under penalty of law.

The plan looks to spend $1 trillion on infrastructure initiatives — roads, bridges, airports, including ways to make them energy sustainable — along with what’s called the American Rescue Plan, with a price tag of $1.9 trillion. This is seen as the cornerstone of Biden’s campaign promises made before the 2020 election; he stands to have push-back not only from Republicans on Capitol Hill, but some conservative Democrats, as well.

It’s been a big week for economic data — most of which has been positive — but tomorrow we will only see one new metric: the preliminary University of Michigan consumer sentiment index for September. If it follows other data we’ve seen reported for this month so far, we may expect a positive surprise beyond the 72.0 expected, which itself is higher than the 70.3 reported a month ago.

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