June 24 was a momentous day for the stock market and President Joe Biden as the Nasdaq and the S&P indexes closed at record highs as the president’s infrastructure bill is now being embraced by the Democrats and Republicans. The Dow also saw a big jump as well as it jumped 1% higher by the end of the day.
Many have taken this as a sign of economic recovery as the world comes out from the shadow of the pandemic.
The Infrastructure Bill
President Biden and lawmakers have worked for weeks trying to create an infrastructure bill that could have support from both parties and passed through Congress which they just achieved. The bill allocates $579 billion that will be invested in transportation, public transit, power, broadband internet, roads, and many other utilities.
We’ve struck a deal. A group of senators – five Democrats and five Republicans – has come together and forged an infrastructure agreement that will create millions of American jobs.
— President Biden (@POTUS) June 24, 2021
The bill proposes funding the plan by having the wealthy pay the taxes they owe, redirecting leftover pandemic relief funds, and private-public bonds among other ideas.
Stock Market Rise
Since the infrastructure bill affects so many different industries, the stock market boost had a ripple effect and the boost was felt throughout various companies. For instance, construction company Caterpillar and aerospace firm Boeing both went up more than 2%, lifting the Dow Jones.
Infrastructure deal stock winners:
— Kristen Scholer (@KristenScholer) June 24, 2021
Tech companies also saw a boost such as when Telsa went up 3.5% after CEO Elon Musk mentioned that the company’s Starlink service won’t go public until a few years down the line, but will try to “give long-term Tesla shareholders preference.”
Jobless claims in the country have continued to drop, although not as fast as some would like. For the week of June 19, there were a total of 411,000 first-time filings, down from the previous total of 418,000 filings.
According to the Labor Department, the estimated number was 380,000 filings, but while the goal was not reached this month, there’s no cause for concern as Ian Shepherdson, chief economist at Pantheon Macroeconomics, said “We expect new lows for initial claims in July…”
Wide Area of Effect
Countries around the world are feeling the effects of the S&P 500 jump as Asia-Pacific stocks rose early Friday morning. The Nikkei 225 (which is like Japan’s version of the S&P 500) rose 0.81% in the early morning as did South Korea stock index Kospi which has gone up 0.78% at the time of this writing.
Good morning Asia! A strong performances overnight for the major US stock indices with Nasdaq 100 and SP 500 (finally) hit fresh all-time closing highs. The Nasdaq 100 recorded 4 consecutive positive closes this week so far, its best since 25 March
— Kelvin Wong, CFTe (@KelvinSCWong) June 25, 2021
This week has been kind to Asian stock markets as multiple stock indexes and benchmarks rise, namely after the chairman of the Federal Reserve said the current United States inflation is probably temporary, easing concerns and fears.
As the president’s infrastructure bill currently stands, it appears to have a good chance at passing through Congress; although the Democrats want to try and push a larger spending plan during the reconciliation process. This means the bill may change drastically by the time it passes through Congress.
Traders have voiced concerns over the current high inflation rates and how much of an impact it will have on this sudden growth as well as economic recovery. In response, strategists, like Keith Lerner (Portfolio and Market Strategist at Truist Advisory Service), have downplayed these fears saying “this year and next we expect above-trend economic growth.”