October 16, 2021

George Cafe Journal

The Power of Success

Infrastructure Progress Sends Dow, S 500 to New Highs

Three people working on construction site Getty Images

The Senate on Tuesday green-lit a roughly $1 trillion infrastructure bill that was greeted with cheers by much of the market – though, not all of it.

The Bipartisan Infrastructure Investment and Jobs Act lived up to its name by passing the Senate 69-30. The bill, if passed, would authorize about $550 billion in new federal spending on traditional infrastructure such as roads, tunnels and bridges, as well as on projects such as expanding access to broadband internet and building electric-vehicle charging stations.

The industrial (+1.0%), materials (+1.5%) and energy (+1.8%) sectors led the way, the latter aided by a 2.7% improvement to U.S. crude oil futures, to $68.29 per barrel. Exxon Mobil (XOM, +1.7%), Caterpillar (CAT, +2.5%) and Freeport-McMoRan (FCX, +4.8%) were among some of the day’s notable risers.

Not everyone was ready to chalk up all of Tuesday’s gains to the Senate’s action, however.

“Some of this may be a result of the infrastructure bill but I think it has more to do with a resurrection of the cyclical, value-oriented rally that we saw earlier in the year,” says Brian Price, head of investment management for Commonwealth Financial Network a Massachusetts-based registered investment adviser and independent broker/dealer. “We’ve seen this before when interest rates increase, and we’re seeing more of that lately with some hawkish commentary from certain members of the Fed.”

The Dow Jones Industrial Average improved by 0.5% to a record close of 35,264. The S&P 500 gained 0.1% to 4,436, surpassing its previous all-time high by a fraction of a point.

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But the Nasdaq Composite (-0.5% to 14,788) struggled thanks to slippage in the tech sector (-0.8%) amid a bump higher in interest rates.

Other news in the stock market today:

  • The small-cap Russell 2000 managed a 0.2% improvement to 2,239.

  • 3D Systems (DDD) enjoyed a massive earnings pop Tuesday. In its second quarter, the 3D printing specialist reported adjusted earnings per share of 12 cents on $162.6 million in revenue. Both figures came in above what analysts were expecting and represented strong growth from the year prior,when 3D Systems reported a quarterly loss of 13 cents per share on $112.8 million in revenue. DDD stock closed up 21.5%.

  • AMC Entertainment (AMC) stepped into the earnings confessional bright and early, reporting a slimmer-than-anticipated net loss of 71 cents per share on higher-than-anticipated revenue of $444.7 million. The company also said it would start accepting Bitcoin at its movie theaters by the end of the year. But while the meme stock was up nearly 10% earlier in the day, it closed with a 6.1% loss.

  • Gold futures gained 0.3% to settle at $1,731.70 an ounce.

  • The CBOE Volatility Index (VIX) edged 0.5% higher to 16.80.

  • Bitcoin prices stalled Tuesday, declining 1.0% to $45,514.86. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)

stock chart for 081021

stock chart for 081021

YCharts

Where Infrastructure Progress Could Help the Most

It ain’t over ’til it’s over, of course.

The House likely won’t even take up the infrastructure bill until late September, when it returns from recess, and even if it passes, the spending will be spread out across several years.

But progress is progress.

“While many initiatives in the bill could take a few years to kick in, the boost from this round of stimulus could come just as the recovery wears off,” says Lindsey Bell, chief investment strategist at investment platform Ally Invest. “We may start seeing the market price in higher infrastructure spending as investors try to get ahead of the game.”

Bell adds that several groups of stocks could get a lift the closer the bill gets to President Joe Biden’s desk – the industrial and materials sectors, for instance, as well as more specific industries such as semiconductors and electric vehicles.

If you’re looking for a quick list of investment options from a wide variety of specializations, however, consider these 14 infrastructure stocks. These picks range from machinery manufacturers to EV charging station producers to telecom real estate plays – and all could reap rewards if this infrastructure spending plan is passed into law.

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