US stocks rose on Wednesday, closing March and the first quarter at high levels as investors switched back to high-growth technology while contemplating President Joe Biden's major infrastructure spending plan.
The S&P 500 ended the session 0.4% higher at 3,972.89 after rising 0.9% to hit a new intraday record high. The tech-heavy Nasdaq Composite gained 1.5% to 13,246.87, while Apple, Microsoft and Facebook each gained at least 1.6%. Tesla popped more than 5%. The Dow Jones Industrial Average fell 85.41 points, or 0.3%, to 32,981.55.
The Dow and S&P 500 rose 6.6% and 4.3% respectively in March, marking their best month since November and their fourth positive month in five months. For the quarter, the blue chip Dow and S&P 500 rose 7.8% and 5.8%, respectively, for the fourth positive quarter in a row.
The Nasdaq was the relative underperformance as technology stocks are particularly sensitive to rising interest rates as they rely on cheap borrowing to invest in their future growth. The tech-heavy benchmark gained 0.4% in March. For the quarter it was up 2.8%.
Biden will unveil a more than $ 2 trillion infrastructure package on Wednesday. The plan would raise the corporate tax rate to 28% to fund it, an administration official told reporters on Tuesday evening. The White House said the tax hike, combined with measures to prevent profit shifting, would fund the infrastructure plan within 15 years.
"Investors are" selling the news "about President Biden's infrastructure plan and turning away from the beneficiaries of the infrastructure – energy, materials, industry – and into the technology-laden sectors that have" benefited "from the pandemic," said Chris Hussey , Managing Director at Goldman Sachs. The bill "was largely in line with expectations and received with indifference by the stock markets, which may have been trading these issues for weeks in advance."
The cyclical sectors of the class, including energy, materials, finance and industrials, posted losses on Wednesday while the S&P 500 tech sector outperformed, up 1.5%.
Some investors are concerned about the negative impact of higher corporate taxes and spike in inflation amid massive fiscal stimulus.
"Economic stimulus is no longer 100% positive in the eyes of the market," Tom Essaye, founder of Sevens Report, said in a note. "That's because it will bring 1] higher yields, 2] rising inflation expectations, and 3] erosion of the idea that the Fed will be put on hold for all of 2021. Furthermore, all of that incentive is being used to offset and initiate tax increases for individuals, businesses and investments. "
The 10-year Treasury yield was unchanged at 1.73% on Wednesday after hitting a 14-month high of 1.77%. Bond yields have risen this year due to the heavy roll-out of Covid-19 vaccines and expectations of a broad economic recovery.
Personal payrolls grew at the fastest pace since September 2020 in March, with companies employing 517,000 workers per month, according to a report by payroll firm ADP on Wednesday. It was a healthy rise from 176,000 in February, but just below the Dow Jones estimate of 525,000.
Investors await the key job report from March on Friday to assess the state of the labor market recovery. Economists estimate that 630,000 jobs were created in March and the unemployment rate fell from 6.2% to 6%, according to the Dow Jones.
– CNBC's Michael Bloom contributed to the coverage.
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