An infrastructure deal looks likely, and that’s good news for these stocks

Good morning, and happy Friday.

It’s looking like a risk-on day as investors continue to cheer an apparent breakthrough in infrastructure talks. Yesterday’s White House announcement of a roughly $1 trillion deal on new spending sent shares soaring, pushing stocks to yet another new record.

U.S. futures are gaining again this morning, following Asia higher. (Europe is trading sideways).

Down below, we look at which sectors are best positioned to gain from billions and billions in new spending.

The bullish mood can be seen in commodities and crypto as well with Bitcoin, at one point, trading at a multi-day high, before retreating.

Let’s see what else is moving markets.

Markets update

Asia

• The bulls are out in Asia. The major indexes are solidly higher in afternoon trading. The Hang Seng, the best of the bunch, is up 1.2%.
• Shares in EBay are down 0.2% in pre-market trading. The e-commerce giant is selling 80% of its Korean business to local online retailer E-Mart, in a $3 billion deal.
• From Tel Aviv to the Tar Heel State, the highly contagious delta variant is going global. As a result, Israel, the world leader in vaccines, will be back to face masks in public and is delaying the opening of its border to foreign travelers.

Europe

• The European bourses were mostly higher at the start. The Stoxx Europe 600, which had its best day of gains in over a month on Thursday, is up 0.1% in the first half-hour of trading, before slipping.
• Cracks are appearing in the EU reopening plan ahead of the make-or-break summer travel period. According to Bloomberg, Germany and France are furious with fellow member states allowing in travelers vaccinated with un-approved Chinese and Russian vaccines.
• Shares in Amazon-backed Deliveroo soared 9% on Thursday, and are down 0.7% this morning, after a U.K. court ruled the meals-delivery firm’s couriers are to be designated self-employed workers.

U.S.

• U.S. futures are gaining again this morning. That’s after all three major exchanges finished in the green with the S&P 500 and Nasdaq notching new records. Growth stocks led the way.
• Speaking of growth… Shares in Nike are popping in pre-market this morning, up 14%. The sportswear giant delivered knockout top-line results after the bell yesterday, boosted by impressive e-commerce and North American sales.
• Another hot stock was Eli Lilly. The drugmaker soared 7% to close at an all-time high after getting an important regulatory pre-approval on its new Alzheimer’s drug.
• Later today, inflation will be in the spotlight when the Commerce Department releases core personal consumption expenditures index data.

Elsewhere

• Gold is up, trading around $1,780.
• The dollar dipped overnight.
• Crude is flat with Brent trading around $75/barrel.
• The crypto board is awash in green. Bitcoin is trading above $34,000.

***

By the numbers

The $2 trillion club

Microsoft, up 22.5% year to date, got there earlier this week, joining Apple in that exclusive grouping. Microsoft’s growth has been fueled increasingly by its cloud business. Who could be next to make the $2 trillion club? That other cloud giant, Amazon. So say analysts at BofA Securities and Morgan Stanley. They ran the numbers on Amazon following its Prime Day bonanza, and see plenty of growth ahead. In fact, Morgan Stanley has a $5,300 “bull case” price target on Amazon, a 45% premium on yesterday’s close. Such a scenario would get it closer to $3 trillion.

$1.2 trillion

Stocks popped yesterday afternoon on news that President Biden and a bipartisan group of senators had agreed to a deal on infrastructure spending. There are a lot of different numbers attached to the deal. I’ll pick the biggest: $1.2 trillion, which would be the estimated price tag for the jumbo, eight-year spending bill on such goodies as upgrades to bridges, roads, transportation and broadband. According to Chris Zaccarelli, CIO at Independent Advisor Alliance, such a deal is good news for “cyclical stocks”—particularly, energy, financial and industrial stocks. Sure enough, those sectors led the gains yesterday on the S&P.

Jeff Buchbinder, Equity Strategist for LPL Financial, meanwhile, sees infrastructure spending as a new tail-wind for investors. “Infrastructure spending strengthens an already very strong economic growth outlook,” he says. “We will very likely get more than $2 trillion in additional spending this year—including this bipartisan agreement and a partisan ‘social infrastructure’ deal later this year, which bolster the outlook for corporate profits and should keep this bull market going strong well beyond 2021.”

Hate to be a killjoy—there’s no guarantee this deal will pass through Congress.

$200 billion

Banks, and their shareholders, got a dose of (widely expected) good news yesterday when the Federal Reserve released stress-test data, showing the nation’s 23 biggest lenders—names like JP Morgan Chase, Bank of America and Goldman Sachs—have plenty of capital to soak up just about any Black Swan event they encounter. On cue, bank stocks soared yesterday. The reason: the passing grades mean banks can resume share-buybacks and dividend payouts. Barclays calculates the capital returned to investors will top $200 billion, the Wall Street Journal reports. The banks are free to detail their plans come Monday, so stay tuned.

***

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

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Today's reads

Pre-IPO stumbles. Could this summer's hottest IPO—that of Robinhood—be delayed? The SEC has opened a review into its crypto trading business, a development that could push the listing into the autumn, Bloomberg reports. 

A buzzy SPAC. It's not every day you see billion-dollar digital media deals. Buzzfeed, which went through a round of layoffs just a year ago as the pandemic hit, announced yesterday it would go public via SPAC, valuing it at $1.5 billion.

"Lord of the Roths." Just about every tax season, I question why would anybody take out one of those capped-at-$6,000 Roth IRAs. So count me as one of the shocked ones who learned just yesterday—okay, I'm a bit late to these things—that the ultrawealthy, including billionaires like Peter Thiel and Warren Buffett—have been using their Roth IRAs as "a Bermuda-style tax haven," ProPublica reports. Thiel has turned his Roth IRA into a $5 billion tax-free (as long as he doesn't touch it until after he turns 59.5 years-old) treasure chest. Every fat cat in America will be calling up his accountant today asking for one of those Thiel IRAs.

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Market candy

42%

Retail traders, the same ones who sent GameStop 🚀, are an ascendant force in the markets, a much misunderstood one. In an effort to better learn something about their motivations and stock-picking strategy, Betterment surveyed hundreds of them. One finding that astounded me: retail investors are highly swayed by what they read on social media. Some 42% report they base their investment decisions on what social media influencers have to say about a stock.