US Stock Market Finishes Mixed as New Headwinds Over Stimulus, China Emerge

The major U.S. stock indexes finished mixed on Thursday with the S&P 500 Index and NASDAQ Composite Index eking out marginal gains. Helping to underpin prices were investors betting on more fiscal stimulus from the U.S. government.

Perhaps putting a lid on the indexes was U.S. President Joe Biden’s warning that China was poised to “eat our lunch”. At the end of the session, it looked as if investors could face some near-term headwinds over resistance to portions of the stimulus package and a threat from China.

Cash Market Performance

In the cash market on Thursday, the benchmark S&P 500 Index settled at 3916.38, up 6.50 or +0.17%. The blue chip Dow Jones Industrial Average finished at 31430.70, down 7.10 or -0.02% and the technology-driven NASDAQ Composite closed at 14025.77, up 53.24 or +0.38%.

The S&P 500 posted 45 new 52-week highs and no new lows; the NASDAQ Composite recorded 292 new highs and nine new lows.

Declining issues outnumbered advancing ones on the NYSE by a 1.08-to-1 ratio; on the Nasdaq, a 1.22-to-1 ratio favored decliners.

US Fiscal Stimulus Update

In the latest development regarding President Biden’s coronavirus relief package, Democrats are now said to be pushing plans to include raising the minimum wage to $15 in the $1.9 trillion stimulus bill. This could be the source of resistance from investors.

Democrats are confronting a growing intraparty dispute over whether the COVID-19 relief bill they are crafting should include a $15-an-hour federal minimum wage, a top progressive priority for years.

Two disagreements are brewing between Democrats:  first, a procedural dispute over whether Senate rules even allow them to include it in the coronavirus relief bill. And second, a policy division over whether a nationwide wage floor of $15 an hour is too high.

A report on Monday by the nonpartisan Congressional Budget Office found that a $15 wage would bring almost 1 million people out of poverty in the next four years and boost cumulative pay by $509 billion for workers who get raises. But it would also raise the debt by $54 billion and cost 1.4 million jobs.

President Joe Biden, who campaigned on a $15 wage and included it in his $1.9 trillion relief plan, told CBS News over the weekend that he didn’t think the wage hike would “survive” because of Senate rules, and he instead floated a “separate negotiation” for a wage hike up to $15.

Biden Warns China is Going to ‘Eat Our Lunch’ if US Doesn’t Get Moving on Infrastructure

President Joe Biden warned lawmakers Thursday that China is aggressively outpacing the United States on infrastructure. This warning was also a source of resistance for investors on Thursday.

“They’re investing a lot of money, they’re investing billions of dollars and dealing with a whole range of issues that relate to transportation, the environment and a whole range of other things,” Biden said he told a bipartisan group of senators whom he met in the Oval Office.

“They have a major, major new initiative on rail and they already have rail that goes 225 miles an hour with ease,” he explained, adding that he spoke with Chinese President Xi Jinping for two hours on Wednesday. “They’re going to, you know, if we don’t get moving, they’re going to eat our lunch,” Biden said after the meeting with the members of the Environment and Public Works committee.

“We just have to step up. And so what I’d like to talk to these folks about – since they are the key committee – is how we begin this. I’ve laid out what I think we should be doing,” the president added.