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  • It was a subdued session for stocks, with the major bourses consolidating close to recent highs amid a lack of fresh drivers.
  • The FOMC minutes, more commentary on infrastructure from Biden, and Fed speakers all failed to inject any direction into trade.

It was a fairly subdued day on Wall Street, with the major bourses largely consolidating close to recent highs amid a lack of fresh market-moving fundamental developments. The S&P 500 gained 0.15% to close just under 4080, the Dow was flat, the Nasdaq 100 rose 0.28% and the Russell 2000 dropped 1.60%. The CBOE Volatility Index dropped sharply by 0.96 vols to the low 17.00s.

In terms of the sectors, tech and growth stocks did the best, aided by the ongoing subdued conditions in US government bond markets; the S&P 500 consumer discretionary sector (up 0.7%) and information technology sector (up 0.5%) were the best performers. Materials (down 1.8%) was the worst-performing sector.

Driving the day

The FOMC minutes of the 16-17 March meeting provided little by way of new information or surprises and thus did not provide any impetus to US equity markets. The same can be said for the latest batch of remarks from US President Joe Biden with regards to his infrastructure spending proposal; no new information and thus not much for markets too trade-off of. Various Fed speakers were also on the wires; influential Fed member Lael Brainard had good things to say about the prospects for economic recovery in the US and Robert Kaplan largely stuck to the usual script.

Some market commentators have suggested that indication from Biden and his other administration officials regards the room to compromise on the proposed corporation tax hike to 28% from 21% as an equity market positive. Note that influential Democrat Senator Manchin (who has a potentially tie-breaking vote in the Senate) has said that 28% is too high and he prefers 25%. Equity market focus has now arguably turned to Fed Chair Jerome Powell remarks on Thursday at an IMF panel and the unofficial start of the Q1 2021 earnings season with the release of bank results.

Separately, some desks are highlighting concerns about a rise in Covid-19 cases and a halting/slowing of the US’ reopening drive as a reason for recent underperformance in small-cap stocks and the Russell 2000 (smaller companies are generally disproportionately exposed to the negative impacts of lockdown and the positive impact of reopening). US health officials have been warning that another wave of infections could be imminent as other major global economies (India, Brazil, Europe) struggle with Covid-19 infection surges.