Infrastructure Week. Finally.

By Jeffrey Cane |  Thursday, June 24 Building. Signs that the economic recovery is gathering steam mattered the most today, overriding, for now at least, worries over inflation and higher interest rates. Initial jobless claims showed a slight improvement from the previous week, while orders for durable goods surged 2.3% in May. Neither report was especially robust, but both pointed to a steady recovery. What really turned the spotlight bright on economic growth, however, was the prospect of another burst of government spending. “We have a deal,” President Biden announced outside the White House around midday after reaching an agreement on infrastructure legislation with a group of 10 Republican and Democratic senators. The agreement calls for $579 billion in new investments, in roads, bridge, airports, public transit, and electric vehicle, broadband, and water infrastructure among other kinds of infrastructure. Total spending could reach $1.2 trillion if extended over eight years. The Dow Jones Industrial Average, which had been lagging behind the Nasdaq Composite earlier in the day, surged 300 points.  Such an infrastructure package,  Steve Goldstein and Jacob Sonenshine wrote on Barrons.com, could “lift the earnings of the more economically sensitive value stocks,” which make up much of the Dow. “Value seems to be benefiting most from this news,” said Brian Price, head of investment management for Commonwealth Financial Network. The Dow ended up 323 points, or nearly 1%, and the Nasdaq finished up 0.7%, its 17th record close of 2021. The S&P 500 rose 0.6% -- its 30th record close of the year. Some obvious beneficiaries of infrastructure spending gained. Vulcan Materials ended up 3.3%, United Rentals advanced 2.8%, U.S. Steel rose 3.4%, and Martin Marietta Materials climbed 2.5%. Lawrence Strauss of Barron's has more on what such an infrastructure package could mean for stocks here.  While the plan is bipartisan and Biden declared “We have to move and we have to most fast,”  the political reality is that passage will be a slow, difficult grind, given the Democrats’ thin majorities in Congress. The president and Democrats have said that infrastructure must proceed alongside passage of other elements of Biden’s $4 trillion economic plan. “The two-step process,” The Wall Street Journal notes,  “sets up weeks of delicate negotiations between Republicans and Democrats and among Democratic factions.” Many more "infrastructure weeks" lay ahead.

 

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