ToplineMajor stock indexes rose to new highs Tuesday following the Senate's passage of a $1 trillion infrastructure bill. This fueled gains in industries that would benefit from the $550billion in new spending it would authorize, despite the House's uncertain fate.As they arrive at the U.S. Capitol, Chuck Schumer (D.N.Y.), and Joe Biden, Senate Majority Leader, speak briefly to [+] reporters. Getty ImagesThe Key FactsThe Dow Jones Industrial Average, which closed at a record on Friday, hit an intraday high shortly before 2 p.m. EDT, climbing nearly 0.5% to 35,285 points thanks to the soaring share prices of construction-equipment maker Caterpillar and chemical manufacturer Dow, which led the index with gains of 2.7% and 2.4%, respectively. The S&P 500 also saw a record closing Friday, rising 0.2% to 4,445 due to Nucor steel producer, which was up almost 7%, and Kansas City Southern railroad company, which was up almost 9%. Brian Price, head of investment management at Commonwealth Financial Network, stated in an email Tuesday that the Senate's passing of the infrastructure bill just before noon on Tuesday was responsible for the "resurrection” rally in the hardest hit sectors. The tech-heavy Nasdaq fell 0.5% to 14,783, despite the strength of the wider market. This was due to semiconductor stocks falling as much as 5%. TrendForce, a market research firm, predicted that the price for memory chips used in computers would fall to 5% by the fourth quarter.Important BackgroundStocks have surged to new heights, despite lingering concerns about the pandemic's resurgence. Investors are gushy over corporate earnings and government efforts to boost the economy's recovery during the pandemic. Since March 2020, the Federal Reserve has maintained interest rates at historic low levels. Congress has authorized $5 trillion in fiscal stimulus funds, not including the $1 trillion in infrastructure bills (which mainly targets roads and bridges) and a huge $3.5 trillion package for social and environmental spending. Democrats are trying to get the Senate to approve party priorities such as Medicare expansion and tuition-free community college.Important Quote"While some of the infrastructure bills could take a while to kick in," Lindsey Bell of Ally Invest wrote Tuesday that the bill is closer to President Joe Biden's desk. She predicted that stocks in industrials, materials and electric vehicles would see a boost.What to WatchFurther obstacles are facing the bipartisan infrastructure package in the House. Speaker Nancy Pelosi (D.Calif.), has repeatedly promised not to take it up until Senate Democrats send her the $3.5 billion budget bill. The Senate's special reconciliation process would allow Democrats to bypass Republican support, passing the spending bill with 51 votes instead the usual 60. This means that all 50 Senate Democrats, as well as Vice President Kamala Harris, would have to support the package. Sens. Sens. Ed Moya, Oanda Senior Market Analyst, wrote that there is uncertainty about the budget resolution. If it is too cut down, progressives will refuse to suspend all infrastructure legislation.TangentGoldman Sachs analysts raised their S&P year end price target to 4,700 in a note last week. This is 7% more than the current levels. The increase was mainly due to record-breaking second quarter corporate earnings, aided by unprecedented government spending.Continue readingDow and S&P 500 Reach New Highs as Blowout Earnings Help to Avert Delta Variant Fears (Forbes).Senate passes $1.2 Trillion Infrastructure bill after months of negotiationsExpected Jobless Claims Drop, While Continuing Claims Hit New Post-Pandemic Lows (Forbes).
