In a busy day of earnings releases and policy announcements, equity markets were mixed but still closed near record highs.

The Fed maintained its support as expected, even with an economy that policymakers acknowledged is accelerating.

The attention tonight shifts to President Joe Biden’s speech to Congress where he will release details of his American Families Plan.

The 10-year Treasury yield is back above the 1.6 percent level, a near tow-week high, helping cyclical investments outperform. Strong earnings from Alphabet led the communication services sector higher.

The focus was on the Fed today, with investors looking for clues on the timing of the tapering of the bank’s bond purchases. Policymakers acknowledged that economic activity and employment have strengthened as faster vaccinations have brightened the outlook, but did not indicate any change in the level of accommodation provided.

Under the Fed’s updated policy framework that focuses on a broad and inclusive definition of employment gains and average inflation targeting, policymakers are not likely to act preemptively based on economic projections, but will rather wait for data to confirm the substantial progress made, and this could take time.

However, expect that improving conditions will eventually prompt the Fed to start pairing back its bond purchases likely near the end of the year, which would be the first step in a patient approach toward normalization.

Fiscal policy is also at the forefront ahead of the president’s speech to Congress, where he will outline the American Families Plan worth $1.8 trillion.

The new spending will focus on child care, education and paid leave and will be largely paid for by raising taxes on the wealthy (identified as households making more than $1 million per year).

Together with the American Jobs Plan that was announced earlier this month and focuses on infrastructure, the proposal would add modestly to the sizable fiscal stimulus  that has been a critical fctor in accelerating the recovery.

However, the higher taxes proposed could be a catalyst for short-term market volatility.

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