Stocks traded slightly higher on Thursday as market participants assessed the House approval of President Donald Trump's tax bill and its potential impacts on the U.S. deficit -- something investors were already concerned over as U.S. Treasury yields spiked this week.
House Representatives passed Trump's "big, beautiful bill" along party lines early Thursday by a single vote, moving the legislation one step closer to the president's desk. In its current state, which is subject to change in the Senate, the bill contains notable cuts to federal healthcare assistance and Medicaid, changes in the federal deduction limit for state and local taxes (SALT), and delivers Trump's campaign promises to make the tax cuts from his previous administration's Tax Cuts and Jobs Act of 2017 permanent and eliminate taxes on tips and overtime.
The Dow Jones Industrial Average (NYSE: DIA) and S&P 500 Index (NYSE: SPY) each slipped below the flatline, while the tech-heavy Nasdaq Composite (NASDAQ: QQQ) added about 0.3%.
An analysis from the nonpartisan Congressional Budget Office estimates that if the bill becomes law in its current state, "resources would decrease for households in the lowest decile (tenth) of the income distribution, whereas resources would increase for households in the highest decile."
House Representatives passed Trump's "big, beautiful bill" along party lines early Thursday by a single vote, moving the legislation one step closer to the president's desk. In its current state, which is subject to change in the Senate, the bill contains notable cuts to federal healthcare assistance and Medicaid, changes in the federal deduction limit for state and local taxes (SALT), and delivers Trump's campaign promises to make the tax cuts from his previous administration's Tax Cuts and Jobs Act of 2017 permanent and eliminate taxes on tips and overtime.
In other words, buying power for the poorest Americans would decrease at a time where inflation is a primary concern for the health of the economy in wake of Trump's tariff policies.
An analysis from the nonpartisan Congressional Budget Office estimates that if the bill becomes law in its current state, "resources would decrease for households in the lowest decile (tenth) of the income distribution, whereas resources would increase for households in the highest decile."
The Penn Wharton Budget Model estimates the cost of the bill would increase the already $36 trillion U.S. deficit by $3.3 trillion over the next decade, while a separate model sees the federal government's debt soar by $5.8 billion over 10 years if all temporary tax provisions are made permanent.
In other words, buying power for the poorest Americans would decrease at a time where inflation is a primary concern for the health of the economy in wake of Trump's tariff policies.
On Thursday, the 30-year Treasury yield climbed to its highest level since Oct. 2023, about 5.1%, after spiking in previous sessions after Moody's Ratings downgraded its U.S. sovereign debt rating late Friday. The benchmark 10-year Treasury bond yield, which impacts interest rates for consumer loans, also rose to 4.6%.
Wolfe Research's Chief Investment Strategist Chris Senyek wrote in a Thursday note that the firm expects long-term interest rates to continue to impact market growth this year as the U.S. economy heads towards "an unsustainable path."
The Penn Wharton Budget Model estimates the cost of the bill would increase the already $36 trillion U.S. deficit by $3.3 trillion over the next decade, while a separate model sees the federal government's debt soar by $5.8 billion over 10 years if all temporary tax provisions are made permanent.
"With a large wall of maturities set to roll off over the coming year, uncertainty on the inflation outlook and pace at which the Fed cuts, the path of long-term interest rates are likely to continue to be major drivers of markets over the remainder of the year," Senyek wrote.
On Thursday, the 30-year Treasury yield climbed to its highest level since Oct. 2023, about 5.1%, after spiking in previous sessions after Moody's Ratings downgraded its U.S. sovereign debt rating late Friday. The benchmark 10-year Treasury bond yield, which impacts interest rates for consumer loans, also rose to 4.6%.
Wolfe Research's Chief Investment Strategist Chris Senyek wrote in a Thursday note that the firm expects long-term interest rates to continue to impact market growth this year as the U.S. economy heads towards "an unsustainable path."
Economic News:
Sales of Previously Owned Homes fell to the slowest pace for April since 2009 as the typically strong spring housing market struggles to gain footing as a more discouraged consumer faces high interest rates and expects more incoming inflation.
"With a large wall of maturities set to roll off over the coming year, uncertainty on the inflation outlook and pace at which the Fed cuts, the path of long-term interest rates are likely to continue to be major drivers of markets over the remainder of the year," Senyek wrote.
Economic News:
Home sales declined 0.5% month-to-month to a seasonally adjusted, annualized rate of 4 million units, the National Association of Realtors reported Thursday. Sales fell 2% annually in April, coming short of expectations.
"Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy," said Lawrence Yun, chief economist at NAR, in a release. "Pent-up housing demand continues to grow, though not realized. Any meaningful decline in mortgage rates will help release this demand."
Sales of Previously Owned Homes fell to the slowest pace for April since 2009 as the typically strong spring housing market struggles to gain footing as a more discouraged consumer faces high interest rates and expects more incoming inflation.
Home sales declined 0.5% month-to-month to a seasonally adjusted, annualized rate of 4 million units, the National Association of Realtors reported Thursday. Sales fell 2% annually in April, coming short of expectations.
U.S. Economic Output rebounded in May as activity in both the services and manufacturing sectors rose higher as "business confidence has improved" in large part due to the pause in higher tariffs between the U.S. and China. The S&P Global's flash U.S. composite PMI came in at 52.1 in May from 50.6 in April, while separate sector PMI readings for manufacturing and services each increased to 52.3 from the previous month's reading of 50.2 and 50.8, respectively.
"Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy," said Lawrence Yun, chief economist at NAR, in a release. "Pent-up housing demand continues to grow, though not realized. Any meaningful decline in mortgage rates will help release this demand."
S&P Global Chief Business Economist Chris Williamson said in the release that the data, however, shows signs that tariffs are putting pressure on prices and supply chains.
"Supply chain delays are now more prevalent than at any time since the pandemic led to widespread shortages in 2022, and prices charged for both goods and services have spiked higher as firms and their suppliers seek to pass on tariff levies to customers," Williamson said, adding that the month's rise in prices was "the steeped since August 2022."
U.S. Economic Output rebounded in May as activity in both the services and manufacturing sectors rose higher as "business confidence has improved" in large part due to the pause in higher tariffs between the U.S. and China. The S&P Global's flash U.S. composite PMI came in at 52.1 in May from 50.6 in April, while separate sector PMI readings for manufacturing and services each increased to 52.3 from the previous month's reading of 50.2 and 50.8, respectively.
S&P Global Chief Business Economist Chris Williamson said in the release that the data, however, shows signs that tariffs are putting pressure on prices and supply chains.
First-time Unemployment Insurance Filings ticked lower last week as the labor market remains stable despite heightened macroeconomic uncertainty. Initial claims totaled a seasonally adjusted 227,000 for the week ending May 17, the Labor Department reported Thursday, declining by 2,000 from the previous week and coming in below expectations. Continuing claims, which are tracked a week behind, rose by 36,000 to 1.9 million.
"Supply chain delays are now more prevalent than at any time since the pandemic led to widespread shortages in 2022, and prices charged for both goods and services have spiked higher as firms and their suppliers seek to pass on tariff levies to customers," Williamson said, adding that the month's rise in prices was "the steeped since August 2022."
First-time Unemployment Insurance Filings ticked lower last week as the labor market remains stable despite heightened macroeconomic uncertainty. Initial claims totaled a seasonally adjusted 227,000 for the week ending May 17, the Labor Department reported Thursday, declining by 2,000 from the previous week and coming in below expectations. Continuing claims, which are tracked a week behind, rose by 36,000 to 1.9 million.