Wall Street has started August mostly lower after a solid July. The growing resurgence of the highly-infectious Delta variant of COVID-19 and mounting inflationary pressure on the back of significant supply-side disruptions have dented investors' confidence to some extent.

The second-quarter earnings season has been impressive so far. The major part of the earnings season will be over this week. Market participants are concerned whether the U.S. economic recovery has already reached its peak and what the next driver for the risky stock markets will be.

The proposed infrastructure plan of the Biden administration is likely to play the role of a key catalyst going forward. The bill will provide federal money into physical infrastructure projects such as roads, bridges, passenger rails, airports, drinking water and waste-water systems, high-speed Internet and climate-related infrastructure.

Biden's Infrastructure Plan

On Aug 1, Senate introduced a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. The 2,702-page legislation is aimed at establishing the United States with the world's best economic infrastructure. Total spending may go up to $1.2 trillion if the plan is extended to eight years.

The infrastructure bill will provide $100 billion toward roads, bridges and other major projects. The bill will provide $11 billion toward reducing car crashes and fatalities through a “Safe Streets for All” program. The plan allocates $39 billion to modernize public transit and improve access for disabled people.

In addition, the bill has proposed $66 billion for passenger and freight rail, $15 billion for electric vehicles and buses, and $17 billion for airports, ports and waterways. The plan will invest $50 billion and $55 billion in water infrastructure and clean water projects, respectively.

Moreover, $65 billion will be invested in high-speed Internet (broadband), $21 billion in environmental clean-up and $73 billion in Power infrastructure.

Majority leader Chuck Schumer aims to pass the bill before Senate’s month-long recess starting Aug. 9. Moreover, the Democrats will also try to pass a budget measure allowing them to approve a separate $3.5 trillion spending package without a Republican vote. The massive $3.5 trillion plan will include child care, tax breaks, health care and environmental issues.

U.S. Economy Exceeds Pre-Pandemic Level

The Department of Commerce reported that the U.S. GDP grew 6.5% in second-quarter 2021, far below the consensus estimate of 8.4%. Despite missing the estimate, in absolute term, U.S. GDP in second-quarter 2021 came in at $19.4 trillion, exceeding $19.2 trillion recorded in fourth-quarter 2019, the last quarter before the global outbreak of coronavirus.

The consumer spending that accounts for nearly 70% of the GDP, remained rock solid. The core personal consumption expenditure (excluding volatile food and energy items) jumped 6% in the second quarter from an upwardly revised 2.7% in the previous quarter.

The proposed infrastructure plan will generate a good number of jobs to help the struggling labor market and in turn provide more money to Americans as the existing coronavirus-led fiscal stimulus will fade out gradually.

Our Top Picks

We have narrowed down our search to five stocks that are likely to gain from the newly proposed infrastructure development plan. These stocks have strong potential for 2021 and witnessed solid earnings estimate revisions within the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our five picks year to date.

Image Source: Zacks Investment Research

Caterpillar Inc. CAT manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives worldwide. The pickup in global industrial activity is likely to contribute to its top-line performance in the coming quarters.

The Zacks Rank #2 company has an expected earnings growth rate of 48.2% for the current year. The Zacks Consensus Estimate for the current year has improved 0.5% over the last 30 days. The stock price has surged 12.7% year to date.

Terex Corp. TEX manufactures and sells aerial work platforms and materials processing machinery worldwide. It operates in two segments, Aerial Work Platforms and Materials Processing. Terex is focused on aligning production and cost structure across segments in response to the customer demand environment while also aggressively managing cost and working capital.

The Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 1.2% over the last 30 days. The stock price has climbed 36.6% year to date.

Nucor Corp. NUE is a leading producer of structural steel, steel bars, steel joists, steel deck and cold-finished bars in the United States. It operates through three segments: Steel Mills, Steel Products, and Raw Materials.

The company is seeing consistent momentum in the non-residential construction market. Demand in non-residential construction markets was strong in the most recent quarter. Nucor’s downstream products unit is benefiting from the continued strength of non-residential construction markets.

The Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 3.6% over the last 7 days. The stock price has soared 91.9% year to date.

United States Steel Corp. X produces and sells flat-rolled and tubular steel products primarily in North America and Europe. It operates through three segments: North American Flat-Rolled (Flat-Rolled), U. S. Steel Europe (USSE), and Tubular Products (Tubular).

The investment in Big River will bolster U.S. Steel’s position in high-margin steel-end markets including energy, infrastructure and automotive. U.S. Steel expects the investment will strengthen its Flat-Rolled segment’s position to cater to the growing U.S. and Mexican markets.

The Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 26.9% over the last 30 days. The stock price has jumped 49.5% year to date.

Crane Co. CR manufactures and sells engineered industrial products in the United States, Canada, the United Kingdom, Continental Europe, and internationally.

The company is poised to benefit from its diverse portfolio and efficient management team. It has exposure in many end markets like non-residential construction, aerospace, electronics, automated payment solutions, chemical, power and various general industries.

The Zacks Rank #2 company has an expected earnings growth rate of 59.6% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 6.4% over the last 7 days. The stock price has advanced 24.2% year to date.

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