After many months of wrangling, the U.S. Congress finally passed a massive infrastructure spending bill. And while the final tally was much lower than many expected and hoped for, the $1 trillion in additional funds that will be spent on transportation, energy, cybersecurity and broadband, water, and other infrastructure, was well received and sorely needed.
But in general, the investing community responded with little fanfare, sending the Dow Jones Industrial Average (^DJI 2.12%) up 116 points, or about 0.3%, as of 3:07 p.m. EST on Nov. 8. Of Dow components, only shares of Caterpillar (CAT 8.40%) made much noise today, gaining almost 4% on expectations that it will be one of the obvious winners from this new spending.
Big projects could help boost Cat's results
Here are some of the major areas that will get significant funding:
- $110 billion for roads, bridges, and other major transportation projects.
- $105 billion for public transit and rail projects.
- $76 billion for water and ground-pollution removal, and clean drinking water.
- $73 billion for expansion and modernization of the electrical grid.
These kinds of projects require plenty of heavy machinery to complete, and Cat's customers are already gearing up for increased demand. In Cat's third quarter, its backlog of orders increased $7.2 billion from last year and were up $2.2 billion from the prior quarter.
Of course, Cat's customers aren't just buying for the business they'll get from the infrastructure bill, either. Plenty of private projects and other funding measures, along with global spending on infrastructure, will send business Cat's way.
Don't look past Verizon, IBM on infrastructure boost
In addition to transportation, energy, and water, cybersecurity and broadband access are two of the major priorities for the spending in this bill. Fifty-billion dollars are aimed at climate change and cyberattacks, while $65 billion are dedicated to broadband infrastructure.
This could be a positive for both IBM (IBM 2.00%) and Verizon Communications (VZ -3.19%). Increased broadband access means more recurring revenues for Verizon; for IBM, the upside is more businesses able to leverage cloud services and data management.
Upcoming for Dow stocks
Walt Disney (DIS 2.46%) is scheduled to report its fiscal 2021 fourth quarter and fiscal full-year results on Nov. 10 after the market closes. The key metrics investors will be watching for Disney include customer growth for its streaming services, especially Disney+ but also Hulu, as well as the latest updates on COVID-19's impacts on its theme park and cruise ship businesses.
There will also be a lot of interest in Disney's strategy for its movie releases. Between a spate of releases that haven't received the same critical acclaim as past movies and the ongoing effects of the pandemic on theater attendance, it's critical that the company figure out how to make the most of its extremely valuable intellectual properties.