Key Points
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The tax bill just passed the House. Investors believe it will not improve the deficit.
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As a result, Treasury yields have been going up.
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Macros came in mixed today, so investors are awaiting more clarity.
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Treasury yields have been rising recently, and this has caused the recovery rally to slow down in the past few days. Last Friday, Moody’s downgraded the U.S. credit rating, and investors were spooked about the state of the economy, especially regarding debt and the government’s inability to control spending.
Then, the tax bill only made things worse. Many believe tax cuts would only make debt worse in the long run without spending cuts to fully offset it. Revenue from tariffs is likely what the administration is relying on to increase revenue, but the interim volatility in the bond market is spilling over into the stock market.
Here’s a market update as of 10:30 AM (ET) today.
- The S&P 500 is down 2.14 points, or 0.04%.
- The Nasdaq Composite is up 95.65 points, or 0.5%.
- The Dow Jones Industrial Average is down 78.31 points, or 0.19%.
Tax Bill Passes House
The tax bill referred to as “The One Big Beautiful Bill Act” was just passed by the House. The 215-214 vote was very narrow, and the bill will now await consideration in the Senate.
It will make many of the tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) permanent. Alongside this, there will be new tax breaks. No tax on tips, no tax on overtime pay, car loan interest deduction, senior deduction, a child tax credit increase, and Trump accounts are among them.
Plus, the State and Local Tax (SALT) deduction cap will be raised from $10,000 to $30,000 for joint filers, and $15,000 for individuals.
There are many other changes, but the tax cuts from the bill are not fully offset by the spending cuts.
Macros
The macros have been quite benign if you take everything into account. Home sales data is worse than expected. This could either be due to affordability issues or interest rates still being high, whereas economic data came in stronger than expected. Jobless claims were also slightly lower. The hard data is still quite good if you compare it to the prevailing sentiment about the economy.
- U.S. Existing Home Sales came in at 4 million vs. the 4.1 million forecast.
- U.S. Existing Home Sales Change -0.5% vs. the 1.99% forecast.
- U.S. S&P Manufacturing PMI Flash at 52.3 vs. the 49.9 forecast.
- U.S. S&P Composite PMI Flash at 52.1 vs. the 50.3 forecast.
- U.S. S&P Services PMI Flash at 52.3 vs. the 51 forecast.
- U.S. Initial Jobless Claims at 227,000 vs. the 230,000 forecast.
- U.S. Continued Jobless Claims came in at 1.903 million vs. the 1.8816 million forecast.
Other Assets
- Gold Futures fell 0.6% to $3,294.
- Crude Oil Futures are down 0.8%.
- Natural Gas Futures are down 1%.
- Bitcoin is up 1.35 to $111,038. It recently hit an all-time high.
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