Optimism on Wall Street after Joe Biden presented infrastructure plan

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There was great excitement about how the market would react to President Joe Biden’s comprehensive infrastructure plan. The proposed plan will cost over $ 2,000 billion in full, and will be partially funded by increased taxation of large corporations and wealthy Americans – if Biden gets his way.

Biden presented the proposed plan in detail during a speech in Pittsburgh on Wednesday night Norwegian time, and the market responded by sending the leading indices up in the pre-trade market.

This is what it looks like for the leading indices shortly after the stock exchange opens:

  • Industrial-heavy Dow Jones rises 0.30 percent
  • The S&P 500 aggregate index rises 0.7 percent
  • The Nasdaq technology index is up 1.3 percent

The S&P 500 collective index, which consists of 500 of the largest American companies, thus crosses 4,000 points for the first time in history. All of the 20 companies in the Nasdaq index with the highest weighting rise from the start.

Bank of America strategist Savita Subramanian says that the market is probably blind to the positive aspects of the infrastructure plan, and has not yet digested the possible tax increase.

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– I think the market prices after the good news about infrastructure. “I do not think the market has necessarily priced in the negative with the plan, and that is how we are going to pay for this,” Subramanian told Cnbc, adding that we can expect a setback soon.

Just before the stock market opened, it also became clear that there were 719,000 applicants for unemployment benefits in the US last week, against the expected 675,000. That’s an increase of 61,000 from the week before, according to Cnbc.

Among individual shares, we can mention that Microsoft is rising from the start, after it became clear last night that the company has won a contract for the delivery of 120,000 “mixed reality glasses” of the type HoloLens to the US Army. The ten-year contract will be worth around 21.9 billion dollars, equivalent to 187 billion kroner.

Bidens plan

Biden’s infrastructure plan initially extends over eight years, and has an estimated cost of around 2,000 billion dollars, equivalent to 17,000 billion kroner, or one and a half oil funds. The plan is presented shortly after Biden received through the $ 1900 billion corona support package.

– With the corona support package, we met immediate needs. Now it’s time to rebuild, Biden said when he presented the plan.

This is how the use will be distributed, according to Cnbc:

  • $ 621 billion for transportation, including bridges, roads, public transportation, ports, airports, and electric vehicles
  • $ 400 billion for the elderly and disabled
  • $ 300 billion for drinking water, broadband capacity, and electrical networks
  • $ 300 billion for housing construction and renovation, as well as construction and upgrading of schools
  • $ 580 billion for US manufacturing, research and development

According to Biden’s proposal, the plan will be partly financed by increasing the corporation tax to 28 percent, after the Republicans lowered it to 21 percent from 35 percent in 2017.

Many Republicans, as well as a number of moderate Democrats, are critical of Biden’s comprehensive plan. Among Democrats Josh Gotthemer.

“We must be careful about doing something that is too big or too much in the midst of a pandemic and an economic crisis,” he told the Axios website.

Republican Mitch McConnell is not surprisingly critical of the plan, respectively, how it should be funded.

“It is unlikely that I will support the proposal due to the tax increases,” the top Republican told reporters ahead of the presentation.

– It’s like a Trojan horse. It’s called infrastructure, but inside the Trojan horse there will be more borrowed money, and massive tax increases on all productive parts of our economy, were among McConnell’s comments on Wednesday.

– Wall Street did not build this country

Biden had traveled to Pittsburgh, Pennsylvania to talk about the comprehensive infrastructure plan. He spent a lot of time appealing to the middle class.

– Today I propose a plan for the country that rewards work, and that not only rewards prosperity. It builds a fair economy that gives everyone the opportunity to achieve success. It will create the strongest, most resilient and innovative economy in the world, Biden said during the televised speech.

Biden came at the same time as going to Wall Street, and a number of companies that are part of Big Tech. He said, among other things, that companies like Amazon use loopholes to avoid paying “a single penny” in federal income taxes.

– This is about opportunities for everyone. It’s time to build our economy from the bottom up, and from the middle out. It was not Wall Street that built this country. It was you, the middle class, he said.

Whether the infrastructure plan actually becomes a reality depends on whether Biden manages to secure large enough political support for it. Negotiations are expected to take place in the coming weeks and months. Both his predecessor Donald Trump and Trump’s predecessor Barack Obama also made big promises about infrastructure investments, but struggled to put the plans into practice. (Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other form of use of all or part of the content, can only take place with written permission or as permitted by law. For further terms see here.

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