Stocks on Wall Street peaked Thursday after the Biden administration struck an infrastructure deal worth about $1 trillion.
The technology-heavy Nasdaq Composite rose 0.7 percent, approaching another record. It was the third consecutive day of gains for the index. Electric car maker Tesla and tech fitness group Peloton were among the biggest winners, up 3.5 percent and 3.7 percent respectively. The broader blue-chip S&P 500 was also at an all-time high, rising 0.6 percent.
The gains come as President Joe Biden secured bipartisan support for a deal that will focus on upgrading roads, bridges and broadband networks over the next eight years. While the package is smaller than the initial $2.3 trillion plan announced in March, it removes significant uncertainty for investors, who have long waited for more clarity on the prospects of additional government spending.
It follows a period of volatility in financial markets after Federal Reserve officials last week put forward their projections for the first rate hike after the pandemic by a year. Trade has since calmed down after Fed chairman Jay Powell offered moderate reassurances that high hurdles remained to monetary policy tightening.
Investors have also adjusted their portfolios to be less dependent on the economically sensitive “value” stocks in sectors such as energy and banking that have dominated stock market growth since drug makers announced effective Covid-19 vaccines in November.
“Markets have priced in an economic cycle that will be relatively shorter than previously anticipated,” said Bastien Drut, a strategist at CPR Asset Management, referring to the period between the recovery from the pandemic shock and the next recession.
Technology stocks and other so-called growth companies, whose valuations are influenced by estimates of future earnings, have also flattened by a decline in yields on long-term government bonds, which are a marker of how much investors will pay for companies’ cash flows.
Fed officials’ projections last week weighed on the prices of five-year Treasuries and rose those of 30-year bonds. The yield on 30-year government bonds, which moves inversely with the price, has fallen from more than 2.2 percent last Wednesday to 2.11 percent.
“The magnitude of this particular move for growth stocks has been very high,” said Roger Lee, strategist at Investec.
Elsewhere, the pound fell from its highest level against the euro since early April, after the Bank of England said its monetary policy “remained appropriate” from the pandemic era.
The BoE said the UK would go through “a temporary period of strong” growth and inflation above target “after which growth and inflation will decline”.
The pound, which traded at $1.17 before the BoE’s monetary policy meeting Thursday, lost 0.4 percent against the single currency to $1.1664. Against the dollar, the pound also fell 0.3 percent to $1.3912.
London’s FTSE 100 index, which is full of exporters benefiting from a weaker pound, closed 0.5 percent higher.
The yield on the 10-year British government bond, which moves inversely with the price, fell 0.04 percentage point to 0.74 percent.
In Europe, the Stoxx Europe 600 stock index rose 0.9 percent after the Ifo Institute’s business climate index climbed to a higher-than-expected value of 101.8 in June, from 99.2 last month, fueling optimism among corporate bosses in Germany. , the economic powerhouse of the eurozone, stressed. Frankfurt’s Xetra Dax ended the session with 0.9 percent.
Brent oil, the global oil benchmark, rose 0.3 percent to $75.52 a barrel.
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