President Joe Biden will unveil his third big spending package in 100 days since taking office, while the Federal Reserve is expected to say it’s not fazed by roaring commodity prices. Alphabet (NASDAQ:GOOGL) reports blowout earnings as advertisers scramble to get their names in front of a public that is getting ready to spend again. Facebook and Apple will report earnings after the bell, and oil rises after Goldman Sachs analysts say the demand recovery could take it as far as $80 a barrel. Here’s what you need to know in financial markets on Wednesday, April 28th.
1. Biden to lay out expansion of social safety net
It’s a big day for policy in the U.S., with President Joe Biden expected to lay out details of his plans for an ambitious expansion of public spending, financed at least in part by higher taxes.
Biden will address a joint session of Congress on prime-time television to lay out plans for $1.8 trillion in fresh federal spending to cover a universal pre-school program for three and four year-old children, an expansion of childcare for lower and middle-income families, and two years of community college education, including for the children of illegal immigrants (known as Dreamers).
Biden is also reportedly set to confirm earlier reports that he will raise the marginal rate on capital gains tax to 39.6% to help pay for the programs. Of the three packages outlined so far by Biden, this is the one facing stiffest opposition from Congressional Republicans.
2. Fed expected to shrug off roaring commodity prices
It isn’t just fiscal policy making headlines though. The Federal Reserve will wind up its latest policy meeting, with the big open question being how much acknowledgement Chairman Jerome
Powell gives to recent data suggesting that the recovery is picking up speed.
Powell has said repeatedly since the last meeting that the Fed will only start to tighten policy once “substantial progress” has been made in returning inflation to targeted levels and employment to pre-pandemic levels.
While annual inflation rates are picking up thanks to strong base effects and – increasingly – producer price pressures, the economy is still operating with around 9 million fewer jobs than it had before the pandemic. At his press conference, Powell is likely to be questioned about how he sees the sharp rise in commodity prices in recent weeks. Both agricultural and industrial commodities are still trading close to multi-year highs.
3. Stocks set to open mixed; Apple, Facebook earnings due later
U.S. stock are set to open mixed, with market participants largely content to await the day’s big news before making fresh bets.
By 6:30 AM ET (1030 GMT), Dow Jones futures were down 57 points, or 0.2%, while S&P 500 futures were up less than 0.1%. Nasdaq 100 futures were down 0.2%, due partly to a 2.2% drop in Microsoft stock.
Big Tech dominates the day’s earnings roster again, with both Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) due to report after the closing bell. Boeing (NYSE:BA) and Qualcomm (NASDAQ:QCOM) will also update, with their guidance casting fresh light on the state of the air travel recovery and the global chip shortage.
4. Alphabet's blowout quarter
Alphabet (NASDAQ:GOOG) reported a blowout quarter of earnings, as companies started to spend big on advertising again in anticipation of a return to pre-pandemic consumption patterns. The numbers corroborated strong figures already released by Omnicom and, overnight, by U.K.-based WPP (LON:WPP).
The company posted a 34% gain in revenue to $55 billion, of which $31 billion came from its signature Google products, search, maps and YouTube. YouTube revenue jumped 49% from a year earlier.
Alphabet also announced a new $50 billion buyback program. The shares rose over 4% in after-hours trading.
Microsoft (NASDAQ:MSFT), which also reported after the closing bell on Tuesday, produced solid but less spectacular earnings, with a notable contribution from its gaming operations – which was also a feature of Sony’s better-than-expected update on Wednesday morning in Asia
5. Goldman, OPEC push oil higher; EIA inventories due
Crude oil prices rose moderately overnight as the Organization of Petroleum Exporting Countries and allies led by Russia decided to keep to their current timetable of production increases.
The bloc decided to do without its usual full ministerial meeting, where most of the serious haggling over output quotas gets done, after the Joint Ministerial Monitoring Committee arrived a relatively easy consensus that still sees global demand recovering smartly.
By 6:30 AM ET (1030 GMT), U.S. crude futures were up 0.2% at $63.05 a barrel, while Brent crude futures were up 0.2% at $65.97 a barrel.
A new report from Goldman Sachs (NYSE:GS) analysts predicting that oil will hit $80 a barrel as demand recovers more than offset another relatively weak set of U.S. inventory numbers. Government data on U.S. oil stockpiles are due at 10:30 AM ET.