Week in Review: April 2, 2021

Markets ended the holiday-shortened week higher, with the S&P 500 closing at a new record high and above 4,000, for first time ever. The 10-Year Treasury yield ended the week at 1.72%, up 0.04% from the prior week’s close, but down 0.05% from its intraweek high. With equity markets closed on Friday, it was unclear what investor reaction was to the March jobs report. However, on the surface the report was strong, suggesting that the continued rollout of vaccines and further relaxation of restrictions is having a positive impact on hiring. With the expectation that economic data will continue to improve in the near-term, it remains to be seen how investors will react. Will they view improving data positively with respect to the broader recovery, or negatively with respect to the increased likelihood for higher interest rates and inflation?

On Wednesday, President Biden outlined his $2.3T infrastructure plan which would address numerous current and future infrastructure needs. Under the plan, funding would be provided for “traditional” infrastructure such as roads, bridges, public transit, and the electrical grid, as well as support for technologies such as electric vehicles, clean energy production, and domestic semiconductor manufacturing. The bill would also provide funding for workforce development, schools, hospitals, and affordable housing. To help fund his plan, Biden proposed raising the U.S. corporate tax rate from 21% to 28% and raising taxes on companies’ foreign income from 10.5% to 21%.  As with any such plan, the final version is likely to differ significantly from the initial proposal.