Tech stocks power Wall St to record ahead of Biden stimulus speech

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Wall Street hit a record high, powered by technology stocks, as the White House released details of President Joe Biden’s multitrillion-dollar US stimulus plan that aims to boost funding for scientific research and broadband as well as infrastructure and healthcare.

The S&P 500 index was up 0.8 per cent at lunchtime in New York, touching an all-time high, with the tech sector topping the blue-chip index’s leaderboard. The tech-focused Nasdaq Composite, which has been hit by rising bond yields this quarter, added 1.9 per cent.

A summary of the $2tn plan released ahead of Biden’s speech in Pittsburgh later on Wednesday pledged to “advance US leadership in critical technologies and upgrade America’s research infrastructure”, address a “stark digital divide” and “build high-speed broadband infrastructure to reach 100 per cent coverage”.

But investors raised doubts over whether Biden’s plan would survive weeks of delicate negotiations with Republicans, seeing that the Democratic party holds razor-thin majorities in both chambers of Congress.

“The key question is how easily will this new plan be passed,” said Kevin Thozet, a member of the investment committee at the French asset manager Carmignac.

Brian Gardner of Stifel said: “Although we think there is a reasonable chance that Congress will pass some form of the Biden plan, it will be tougher to pass this plan than it was to pass the Covid relief bill.

“Some divisions are already apparent among Democrats,” he added.

The yield on the benchmark 10-year Treasury note, which sets the tone for borrowing costs worldwide, rose 3 basis points to at 1.73 per cent as investors awaited details on how the latest stimulus would be funded. This follows a quarter of heavy selling that sent the yield on the 10-year note racing up from about 0.9 per cent at the start of the year.

“What we are all waiting to find out is how it will be paid for,” said Remi Olu-Pitan, multi-asset fund manager at Schroders.

A bias towards borrowing over taxation could cause further volatility in US bond markets, she added, in a trend shaking up the traditional use of Treasuries as low-risk assets that cushion portfolios from stock market shocks.

“Government bonds have moved from being the risk-free and stable-return asset to one that is return-free and risky,” she said. “With fiscal stimulus being used increasingly to heal the effects of the pandemic, I think this could be the theme for the next decade.”

In Europe, the Stoxx 600 index closed down 0.2 per cent but remained near pre-pandemic highs. The region-wide benchmark rose more than 7 per cent this quarter, pushed higher by banks and industrial businesses that will benefit from a global economic recovery. The UK’s FTSE 100 fell 0.9 per cent.

In Asia, both the Shanghai Composite and Hong Kong’s Hang Seng index ended the day lower, by 0.4 per cent and 0.7 per cent respectively, while the Nikkei in Tokyo fell 0.9 per cent. Sydney’s S&P/ASX 200 was up 0.8 per cent.

In currencies, the dollar sild 0.1 per cent against a basket of its peers, while the euro added 0.1 per cent to purchase $1.17 and sterling gained 0.3 per cent to just under $1.38.

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