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  • Major US equity bourses were subdued on Tuesday and unable to recover losses incurred during pre-market trade.
  • Wednesday US infrastructure announcement from President Biden, Thursday’s ISM manufacturing survey and Friday’s NFP report are this week’s key events.

Major US equity bourses have broadly been unable to recover losses incurred during pre-market trade and thus closed Tuesday trade with modest losses. The S&P 500 dropped 0.5% to just above 3950, the Dow dropped 0.3% to just above 33K and the Nasdaq 100 dropped 0.5% to just under 12900. Small-caps performed better, with the Russell 2K rising 1.7%. The CBOE volatility index dropped 1.08 to 19.66.

In terms of the sectoral bias; outperformers included financials (+0.7%), industrials (+0.4%) and consumer discretionary (+0.8%), with the former sector performing well amid a rise in real yields and the latter amid outperformance in car markers Tesla (+4.0%), Genera Motors (+4.6%) and Ford (+2.6%). The underperforming sectors included information technology (-1.0%), weighed by the rise in real yields, and typically defensive sectors including consumer staples (-1.1%) and utilities (-0.9%).

Driving the day

Stocks were unsurprisingly subdued on Monday with key risk events looming later this week including US President Joe Biden’s infrastructure package announcement on Wednesday, the March US ISM Manufacturing PMI survey on Thursday and then the March US labour market report on Friday, a day when US equity, bond and futures markets will be closed for Good Friday public holidays. Month-end selling in stocks is also being noted by some desks, who had forecasted equity selling and bond-buying (though the latter has not really been seen so far this week).

Regarding the first of these key risk events, Biden’s infrastructure package; latest reports suggest Biden is about to unveil part one of a two-part which is to have a $2.25T price tag; $650B for roads and bridges, $300B for housing, $400B for clean energy credits and $400B for the elderly. Aside from the total size of planned spending, another key question is how the US government plans to fund all of this spending – tax hikes on corporations and the rich are in the works and could fund up to 75% of the spending, according to the latest sources and commentary from prominent Democrats. Some suggest the Democrats may try to pass Biden’s infrastructure spending package via the reconciliation process again; more details on how the Democrats plan on getting Biden’s plans into law will also be key to watch out for.

Elsewhere, the Conference Board’s Consumer Confidence survey for the month of March showed a massive improvement in sentiment which bodes well for US economic recovery. But US government and health officials continue to fret about rising Covid-19 cases (over 60K new infections were reported on Tuesday, still above the 7-day moving average and still showing a gradual rise on previous weeks).

Finally, the collapse of hedge fund Archegos Capital Management remains in the headlines given the high exposure of some banks to losses; Credit Suisse has said it expects losses to run into the billions. Amid the debacle, US Democrat Senator Warren, who is part of the Senate Banking and Finance committee, released hawkish comments calling for tougher regulation on Wall Street so that a repeat incident doesn’t tank the entire economy.